One of the most important and often misunderstood areas of property taxation is the treatment of repairs and improvements. At the heart of this is the “like for like” principle, a concept that allows landlords to claim tax relief on replacement costs that, from a layperson’s perspective, might appear to be improvements.

What Does “Like for Like” Mean?

Carl Bayley explains in his latest webinar, the principle with a simple analogy: if you turn a property upside down, everything that doesn’t fall out is part of the property. These fixed items – baths, sinks, fitted kitchens, boilers, etc. – are considered integral parts of the building.

When such fixtures are replaced with new ones of a similar type or standard, this is treated as a repair, not a capital improvement. For example:

• Replacing an old bath with a standard modern bath is a repair.
• Replacing worn kitchen units with equivalent modern units is a repair.
• Swapping out an old boiler for a modern equivalent is a repair.

In each case, the expenditure qualifies for a tax deduction against rental income.

When Does It Become an Improvement?

Not all replacements qualify. If the landlord installs something better than what was there before – such as a marble bath with gold taps instead of a standard tub – this is classed as a capital improvement. Similarly, adding new features that didn’t previously exist (for example, fitting a shower in a bathroom that only had a bath) also falls into the improvement category.

The distinction matters because:

• Repairs are deductible against rental profits immediately.
• Improvements are capitalised and only offset against capital gains tax when the property is sold.

The “Nearest Modern Equivalent”

The law recognises that technology and standards change. A repair does not require an identical replacement – only the nearest modern equivalent.

For instance:

• Replacing single-glazed windows with double glazing is treated as a like-for-like repair, since double glazing is today’s standard.
• Replacing a bath with a standard shower can also qualify as like-for-like, since showers are now widely regarded as the modern equivalent.

This principle is particularly significant in the context of Energy Performance Certificate (EPC) regulations. By 2030, rental properties will need to meet grade C. That means landlords may need to replace boilers, improve insulation, or upgrade fittings. Since legislation effectively defines the “modern standard,” many of these changes could qualify as repairs under the like-for-like principle, ensuring landlords can obtain valuable tax relief.

Mixed Projects – Allocating Costs

In practice, refurbishment projects often involve both repairs and improvements. For example, a landlord replacing old bathrooms across a portfolio may:

• Replace baths, sinks, and toilets on a like-for-like basis (repairs).
• Add showers where none existed before (improvements).
• Redecorate after the work is complete (mixed – costs allocated proportionally between repair and improvement).

Bayley stresses the importance of reasonable, consistent, and well-documented allocations. HMRC is more likely to accept claims backed by clear logic, scientific apportionment, or professional valuations.

Key Takeaways for Landlords

1. Repairs vs. Improvements – Always distinguish between like-for-like replacements (repairs) and new/additional features (improvements).
2. Nearest Modern Equivalent – Today’s standards matter; replacing outdated fixtures with modern equivalents still counts as a repair.
3. Legislation Shapes Standards – Future energy efficiency rules may expand what qualifies as a like-for-like replacement.
4. Keep Records – Document your reasoning and cost allocations carefully to avoid disputes with HMRC.

For the first part of this 2-part webinar series, please click here. Topics covered include:

• Landlord expense claims: how to maximise the available deductions and make sure nothing is overlooked
• The cash basis for landlords: how to use it to advantage
• The benefits of joint ownership: for married couples and others
• Furnished holiday lets: getting the best out of the old regime in 2024/25 tax returns and helping clients transition to the new regime in 2025/26

The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article. The information at the time of publishing was accurate and could be subject to final changes.