Changes to the Wear and Tear Allowance

Posted 13 April 2016 by Helen Christie

From April 2016, the Wear and Tear Allowance is being replaced by a government tax relief.

For anyone planning to rent out property, it's important to know how the change of the Wear and Tear Allowance could affect your business. 

What is the Wear and Tear Allowance?

The Wear and Tear Allowance was given to landlords who rent out fully furnished properties. It allowed them to annually claim back money to cover the replacement of furniture and/or furnishings used within accommodation. Typical items covered by the Wear and Tear Allowance include:

  • Beds, sofas, wardrobes and other movable furniture
  • Fridges/freezers
  • Cookers
  • Washing machines
  • Linen
  • Crockery/Cutlery
  • Carpets

Landlords could claim up to 10% off their annual net rent income for the Wear and Tear Allowance. This was regardless of what was actually replaced or not replaced. Rather the 10% (broadly) claimed would be calculated in relation to the rent collected. The Wear and Tear Allowance would be claimed on the supplementary property pages of the self-assessment tax return.

How the new tax relief system will work

The new system allows landlords to a tax relief on actual costs incurred replacing furniture and furnishings during the tax year. In effect, it allows a tax deduction for the cost of replacement furniture and furnishings. As with the Wear and Tear Allowance, the items that can be claimed for are generally the same as before, being described as for the tenant's use within the accommodation. The relief given will be for the cost of replacing a like-for-like item or other costs incurred, such as disposing of an old item of furniture. Likewise, any proceeds received for an old item being replaced will be taken into account. The net expenses incurred for replacing items will then be deducted from taxable earnings. 

Other information about this change:

  • Landlords will need to keep records of costs incurred such as when buying a new piece of furniture
  • This new tax relief system is also available for unfurnished and part furnished properties
  • The initial cost of furnishing a property is not included
  • This relief is not available to furnished holiday lettings or commercial properties since they can still claim capital allowances
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