As a landlord of furnished residential property you can currently claim a wear and tear allowance, equivalent to 10% of the rents you receive for each property. This annual deduction from your profits applies irrespective of the amount you actually spend on furnishings each year.
From 6 April 2016 (1 April 2016 for corporate landlords), you will only get a deduction for the actual costs of replacing ‘domestic items’ used in your let properties. The wear and tear allowance is abolished.
Domestic items are: furniture, furnishings, household appliances and kitchenware, but not fixtures. Anything fixed to the property such as a built-in hob is a fixture. Replacing or repairing fixtures should be classified as repairs to the property.
It’s the replacement cost of the domestic items you should claim for, when the items are replaced on a like for like basis. You don’t claim a deduction when the first set of domestic items is provided in the property. However, any fees you incur when disposing of the old items can be claimed.
From April 2016 it won’t matter whether your property is partly furnished or fully furnished; the cost of replacing carpets or curtains can be claimed even if they are the only items you provide in the property. You may want to wait until after 6 April 2016 before replacing any domestic items in your let properties.
Certain properties are outside this domestic items policy; furnished holiday lettings, and rooms let in your own home where rent-a-room relief is claimed. Please ask us about what you can claim as a deduction when letting property.