Changes to tax relief in rental properties

Changes to tax relief in rental properties
In last year's Summer Budget, a number of changes were proposed that would affect landlords. One of these is the abolition of the wear and tear allowance, which will be replaced in April 2016 by a new form of tax relief applying to replacing furniture in residential dwellings.

What is the wear and tear allowance?

The annual wear and tear allowance allows landlords to write off 10% of their annual rental income to cover ordinary wear and tear of furnishings, even if no money has actually been spent on repairing furnishings in that particular year. This only applies to fully furnished lettings, not unfurnished or part furnished properties. Furnishings covered by the wear and tear allowance include movable furniture included with the property for the use of the tenants, including beds, sofas, curtains, carpets, etc. It does not cover fixtures that are not normally removed from the property in the event of it being sold or vacated, such as baths, toilets and sinks.

What changes are being made?

From April 2016 the wear and tear allowance will be replaced with a new replacement furniture relief. This new relief will apply to all residential landlords, rather than just those letting fully furnished properties. The new replacement furniture relief only allows landlords to deduct the actual capital cost of replacing furniture and furnishings for the use of the tenant. This does not apply to any costs spent by the landlord when initially furnishing the property. Again, replacement of items not usually removed upon the property being vacated are not covered as these are seen to be repairs to the property itself, rather than the furnishings.

This offers greater tax relief for landlords of unfurnished and part furnished properties, as they previously had no such allowance available to them, but landlords of furnished properties are likely to suffer from higher tax bills. This new form of relief, along with the changes for landlords discussed in our blog on stamp duty, could mean more landlords having to put up the cost of their rent on residential properties to make up for the potential increase in property income tax. The National Landlords Association has shown that almost half of landlords in the UK will be affected by this change.

If you would like more information about the changes announced in last year's budget and how they might affect you, get in touch by calling 0115 956 9452 or you can email This email address is being protected from spambots. You need JavaScript enabled to view it..

Personal Tax Planning – Part 2
Marshall Smalley 2016 Budget Overview

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