Replacement furniture relief – how to claim the new relief which replaces the Wear and Tear Allowance for rental properties

April sees a significant change to the way the taxman treats wear and tear on rental properties. Some of our landlords have been asking us what the new rules will mean for them so we have put together a short guide outlining how the regulations will apply to rental properties.

Until April 5^th, landlords of furnished residential property can claim an annual allowance of 10% of the rent they receive to cover any wear and tear – even if no repairs or other work have been carried out.

Replacement Furniture Relief

From April 6^th this system will no longer apply and instead ‘Replacement Furniture Relief’ will come into play. This means landlords of residential properties will be able to deduct the actual costs of replacing furnishings in the property. The new relief only applies to replacing existing furnishings, not the initial cost of furnishing a property.

The new replacement furniture relief means landlords will be able to claim a deduction for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use which will include items such as:

• moveable furniture or furnishings such as sofas and beds
• televisions
• fridges and freezers
• carpets and floor coverings
• curtains
• linen
• crockery and cutlery

Integral fixtures (that would not normally be removed by the owner if the property were sold) are also included. These deductible expenses are considered as a repair to the property and include:

• baths
• washbasins
• toilets
• boilers
• fitted kitchen units

The new system will be simpler for landlords as they will no longer need to decide if the item being replaced is a fixture (and therefore a repair to the property) or not. Whether the item is a fixture or a replacement item of furniture won’t matter, in either case the cost is simply deducted from their rental income before calculating their profit.

What should landlords do now?

For landlords, the main consideration is to make sure they are keeping  records and receipts for their actual expenditure when replacing items in their rental property.  As landlords already need to keep records of expenses such as repairs this is unlikely to be difficult.

As we have already mentioned, the new system will be simpler for landlords to administer and will also benefit many, particularly those who keep their property in really first class condition to attract high calibre professional tenants. Landlords who upgrade furnishings regularly to ensure the highest standards of presentation will now be able to deduct the full cost of replacing items, rather than a flat rate of 10% of rent received – so the new system will more accurately reflect the actual expenses they incur.

With the start of the new system nearly upon us (April 6^th), we would advise landlords to hold off slightly from replacing any items of furniture unless absolutely essential. But when the new rules come into play, it might be a good time to take an objective look at your rental property and decide if some new furnishings might help to enhance its presentation.  And you will reduce your tax bill by doing this after April 6^th!

We’re often asked what type of refurbishment or interior décor help to appeal to the type of professional tenant that most landlords hope to attract. If you’d like some guidance on how to present your property to attract a good tenant – and a healthy rent – call us on 020 7319 9780  or email us.