If you receive rental income from a furnished residential letting then you’ll be aware of a “Wear and Tear” allowance, eligible for use against your properties. This allowance recently saw a change to its terms, read below for more details.
Prior to April 2016, you could choose to claim “Wear and Tear” at a rate of 10% of gross rents to allow you to repair and replace items damaged/worn away during the let of your residential property. However, new rules came in from April 6th 2016, a “Replacement Domestic Items relief”.
Replacement Domestic items Relief is available to all landlords and so this is good news for owners of unfurnished residential properties who previously had no relief for furniture and furnishings.
Here are the new rules;
Replacement Domestic Items Relief –
This new relief is to be used against all expenditure occurring on or after April 1st 2016, for companies, and April 6th 2016 for non-company taxpayers. The old “Wear and Tear” allowance is no longer in use.
Where your financial period crosses the implementation date your accounts will be apportioned accordingly and replacements dealt with under the new rules from the date of implementation.
The change leaves non-domestic equipment used in the business such as computers and maintenance tools without relief since the new rules are designed only to provide relief for those domestic items in the property.
The rules are different for those of you with holiday lettings, capital allowances are available for expenditure on furniture and furnishings and so the wear and tear allowance was not available and the new replacement items will not apply.
Property tax is complex and often depends on the nature and location of the property and the type of expenditure. Always consultant a qualified advisor to ensure you are paying the right amount of tax.
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