Under current proposals, from next year the annual Wear and Tear Allowance will be removed. The Wear and Tear Allowance serves to reduce property income and is available against lettings of furnished, residential properties. It was intended to account for the deterioration of the fixtures and fittings. It does not cover fixtures that are deemed to be “integral” to the building, such as baths, toilets, etc.
Instead of the Wear and Tear Allowance, landlords will be able to deduct the actual costs they incur on replacing furnishings in the property; but no tax relief will be available on the initial cost of furnishing a property. The new relief will be available to unfurnished and part-furnished properties, as well as fully-furnished.
If you are planning significant refurbishments, you may wish to postpone spending too much until after April 2016 to take advantage of the new relief. Alternatively, if your properties need very little upkeep from year-to-year, you may unfortunately find you are worse off under the new relief.
There are a number of recent and forthcoming changes that affect the tax treatment of rental income. If you would like to discuss your affairs in more detail, please contact us and we'll put you in touch with your local TaxAssist Accountant.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.