The HMRC has recently announced that they are about to undertake a consultation to change the ‘wear and tear’ allowance for landlords who rent out properties. This follows the statement in the most recent Budget. It is considering replacing the present 10% annual current allowance, with tax relief on the true costs that landlords are charged on their properties.

The proposed tax relief will affect all landlords that rent out unfurnished, part furnished and furnished properties. This will not apply to landlords who rent out furnished holiday lets, as they are also receiving relief through capital allowances.

 

It is only applicable to those landlords who rent out “homes” and if the move goes ahead then they will be able to make deductions for the actual costs of replacing appliances, furnishings, furniture and kitchenware.

Items listed include beds, carpets, curtains, floor coverings, fridges, freezers, linen and even dinner services and cutlery.

Fixtures that are integral to a residence and would not removed if the property was sold, are not included in the list because the cost of replacing such items are at present a deductible expense, and classed the same as property repairs. However the HMRC points out that if a property is furnished to become a rented ‘home’, the costs are not applicable and if any item that is replaced to make the property more aesthetically pleasing and not because of wear and tear, is again exempt from the relief.

 

The new allowance, if passed, is due to start from April 1st 2016 for income and corporation tax purposes.

The HMRC is claiming that new agreement will provide relief for capital expenditure to a larger variety of business properties and believes that the new system gives landlords, with rented properties, a much fairer system to calculate their taxable profits.

The HMRC states that landlords and partnerships and companies, approximately 750,000 and 50,000 respectively, must now keep up to date records of their true expenditure and the consultation is due to close on 9th October this year.