Currently, a wear and tear allowance is available to landlords who let furnished residential accommodation. The allowance is designed to cover the cost of replacing furniture and furnishings and is available regardless of whether the landlord has actually spent any money on replacements in the tax year.
However, in the summer 2015 Budget the Chancellor announced plans to replace the allowance with a deduction for the actual costs of replacement. The new rules will apply from 1 April 2016 for corporation tax purposes and 6 April 2016 for income tax purposes.
rnished and part-furnished properties, as well as to furnished properties. However, it will not be available in respect of furnished holiday lettings. Under the new relief, landlords will be able to claim a deduction against profits for the cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use in the property. The relief will cover the replacement cost of items such as beds, sofas, chairs, wardrobes and other pieces of furniture, televisions, white goods, curtains and carpets, linen and crockery, and cutlery. However, a deduction is only available for the replacement cost, not the cost of the initial purchase.
Calculating the allowance
The wear and tear allowance is fixed at 10% of net receipts from the furnished letting. Consequently, the higher the rent, the greater the deduction. Net receipts are the receipts from letting the property less any expenses borne by the landlord that would normally be borne by the tenant, such as council tax and utility bills. The allowance is given as a deduction in computing profits.Replacement relief
The replacement furniture relief will apply to landlords of unfu