Renewals and Wear and Tear Allowance
As we head towards the end of the tax year and start thinking about preparing tax returns for the 2013/14 tax year. it is worth a reminder that the renewals basis for residential property owners was scrapped for landlords with effect from 6th April 2013.
In summary, before April 2013, if you rented out a furnished property, you could claim either:
Renewals allowance – where you could claim the cost of replacing things such as fridges, cookers etc less the initial costs or
Wear and Tear Allowance – A 10% allowance to cover wear and tear.
Since 6th April 2013, this renewals allowance is no longer claimable which is not a major issue for most landlords of furnished properties as the Wear and Tear allowance is quite generous. However, it has a larger impact on those landlords renting out wholly or partly unfurnished property where the Wear and Tear Allowance is not applicable.
Landlords who rent out unfurnished property are no longer able to offset the cost of replacing any furniture or equipment against tax. This includes things such as carpets and curtains.
As before, if you make a repair to the property, equipment or furniture, you are still able to claim this cost, however not a replacement cost.
HMRC have also clarified the position on things such as boilers, fitted kitchen units, etc. Replacement of these items will be considered a repair of the building and therefore qualify for tax relief.
So what can you do?
Landlords of furnished properties can claim the Wear and Tear Allowance.
Landlords of unfurnished property will not be able to claim the cost of renewals of equipment or furniture so may wish to remove it when the next tenant moves in, sell it to the tenant or become a fully furnished let.
If you would like to speak to a Property Accountant about what can be claimed for tax purposes get in touch.