Changes for Residential Landlords

  • by Carole Jordan
  • 18 Sep, 2017

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.

Furnished Residential Property "Wear and Tear" allowance - What's changed?

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 –

  1. You can claim relief on the replacement of an item, but not on the initial purchase or purchase of additional goods (furniture, white goods etc.)
  2. If you sell, or part exchange, an old item, then the proceeds received for the old item deducted from the allowable cost of the replacement item purchased.
  3. Expenditure on the new item is restricted, if not “substantially the same” as the item being replaced. Which limits the relief to the cost of an equivalent “old” item.

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.

Renewals of non-domestic items

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.

Furnished Holiday Lettings

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. 

We’re qualified tax advisors , and work with many property investors.  if you require any help understanding this new type of relief then please get in touch .

We have a series of other blogs on buy-to-let which may be of interest to you:

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