From April 2016, landlords across the UK are eligible for a new tax deduction when domestic items are purchased for their properties. The new rules have a far wider effect than the “old” wear and tear allowance that it replaces – but as property investors, will you be better off?
The wear and tear allowance was scrapped in March 2016, whereby residential rental businesses could claim 10% of the rental income as a deduction against business profits where the property was furnished, rather than claiming the actual cost of the furnishings in the property.
The new tax deduction applies to the cost of replacing domestic items, such as sofas, beds, TV’s and fridges. In a little more detail, this new tax ruling applies to landlords of partly furnished or unfurnished properties as well as those with fully furnished ones but it does not apply to furnished holiday lets.
When purchasing domestic items (for the first time) to set up your residential letting, you won’t receive tax relief under the new scheme. However when replacement items are purchased you can claim for the whole of this purchase, subject to a few small adjustments. There are a couple handy tips below that you may find useful –
- Consider purchasing second hand goods, as you won’t receive any tax allowance on the initial expenditure.
- If you have other properties there is a way to get around this first time expenditure. Replace items within your other properties, for which you will receive the new tax deduction and transfer the used items into your new property.
If you have any questions, please do get in touch on 01782 279615.