Buying a rental property?

The removal of the 10% wear and tear allowance that allowed landlords to reduce the tax they paid on furnished property lets (after the end of the 2015-16 tax year) was a significant loss for many landlords. The 10% deduction was available to landlords regardless of whether furnishings in their property were replaced or not.

The wear and tear allowance was replaced by the Replacement of Domestic Item Relief. The relief only allows landlords the ability to claim tax relief when they actually replace furniture, furnishings, appliances and kitchenware.
Landlords must also ensure they keep a record of any capital expenditure which has been incurred on an investment property.

This is important to remember when purchasing a new investment property that care is taken to ensure that any domestic items that are bought with the property are listed and valued in the contract. This would then mean that relief would be available when these items are replaced. In addition, it may be possible to reduce the stamp duty payable.

Planning note

The Replacement of Domestic Item Relief is available for the cost of domestic items such as movable furniture, household appliances, kitchenware and furnishings such as curtains and carpets. There is also an important distinction between deciding whether or not a new item represents a replacement or an improvement. Where the new item is an improvement of the old item the allowable deduction is limited to the cost of purchasing an equivalent of the original item. To be clear, there is no relief available for the initial cost of domestic items purchased for a new or existing rental property.

For more information regarding this relief please call.

Posted in Income Tax

Exeter Accountant MJ Smith & Co

Celebrating 25 years of excellence.

Free 1st Meeting
Fixed Fees
Free Support!

Find out more

Client Portal Login

Forgot Password?

Latest News

New guidance published for employers on setting dress codes and sex discrimination

Following a joint report ("High heels and workplace dress codes") published by the House of Commons Women and Equalities Committee …
Read More

Can a builder charge 5% VAT for their services?

Whilst the majority of businesses charge VAT at the standard rate of 20% there are a number of different VAT …
Read More

Pay and expenses for volunteers

There are many rewarding opportunities for volunteering available across the UK. It is a popular misconception that only young people …
Read More