Wear and tear allowance to be replaced with a new relief.
Landlords can currently claim a wear and tear allowance when they rent out furnished residential property to cover the cost of replacing furnishings. This wear and tear allowance is calculated as 10% of the rental income less expenses incurred by the landlord which are normally paid for by the tenants. No wear and tear allowance is available for unfurnished residential properties. The wear and tear allowance is available for individuals and companies.
From 6 April 2016 (1 April 2016 for companies) the wear and tear allowance will be replaced with a new relief. This will allows landlords for both furnished and unfurnished properties to get tax relief on the cost of replacing furnishings based on the cost when the furnishings are replaced.
Furnished holiday lettings will continue to be eligible for capital allowances.
The consultation Replacing Wear and Tear Allowance with Tax Relief for Replacing Furnishings in Let Residential Dwelling-Houses closes on 9 October and seeks views on replacing the wear and tear allowance with a new relief that allows a deduction for the actual costs of replacing furnishings in let residential properties.
Article contributed from ACCA InPractice