Rural residential landlords should be aware of changes to wear and tear allowance

The current system allows those who let furnished property to claim wear and tear allowance through their tax return based on 10 per cent of gross rental income less any rates usually payable by the landlord - whether the landlord has replaced or improved any furnishings or not.

However, from April 2016 it is expected following a consultation that this will cease and instead those claiming will have to deduct the actual cost of renewing furnishings providing evidence of purchases made. For some landlords this will mean a significant reduction in the amount claimed.

Susie Swift, Partner in the Landed Estates and Rural Business Group of Chartered Accountant Saffery Champness says:

Undoubtedly the current system allowed a generous saving to landlords on the cost of running their properties with the ability for them to claim for notional wear and tear whether they had actually spent anything or not. This new system will be a lot fairer in that it is based on a deduction of the actual expenditure made.

The new relief will apply to all rented residential properties no matter their level of furnishing - the previous allowance had applied only to fully furnished properties. However, the relief does not apply to furnished holiday lettings; nor does it apply to the initial furnishing of a property for rental.

The relief covers furniture, furnishings, kitchenware and appliances provided for a tenant’s use. It does not cover replacement of fixtures such as baths and wash basins which would constitute a repair for the purposes of deduction from rental income.

Susie Swift says:

Providers of furnished rural rented accommodation should take note. These are significant changes and, coupled with the proposal to restrict tax relief on property finance costs to basic rate tax relief by 2020, are likely to mean a reassessment of budgets and timings in terms of rented property income projections.