Rental Property Allowances – The U-Turn

Back in April 2013, the government withdrew the allowance for renewals of furnishings in rental properties, so only the 10% wear & tear allowance was available for furnished property rentals.

The summer budget of 2015, the government announced that from April 2016, the 10% wear & tear allowance was being scrapped and replaced with a new “replacement allowance”.  As an overview, the new allowance enables all landlords of residential lettings to deduct the costs incurred on replacing furnishings in that property. It applies to landlords of unfurnished, fully furnished and part furnished property but not to furnished holiday lets or commercial property.

This relief is only for the replacement of furnishing and not the initial set up of the property with these items. The typical items that would be considered here are:Stainless steel kitchen faucet

  • Carpets & floor coverings
  • Moveable furniture & furnishings like beds, lounge suites
  • Fridge, freezers and other white goods
  • Televisions
  • Curtains & soft furnishing
  • Crockery & cutlery

Feel free to replace those goods now!

What it does mean for landlords is that they need to keep details records of expenditure not only on the set up of the property to know what is being replaced, but also all the replacements. It was much easier when a 10% allowance of rental income could have been taken.

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Don’t forget though, landlords start to loose relief on interest costs from 2017/2018. Deductions from property income will be restricted to:

  • 75% for 2017 to 2018
  • 50% for 2018 to 2019
  • 25% for 2019 to 2020
  • 0% for 2020 to 2021 and beyond

More of that in a blog later on in the year.

 

 

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