In previous tax years, landlords who rented out ‘fully furnished’ properties were able to reduce the tax they paid by claiming a ‘wear and tear’ allowance equivalent to 10% of the net rents received. This allowance could be claimed regardless of whether any furnishings in the property were actually replaced.
With effect from April 2016, this allowance has been withdrawn, and has been replaced by a new system which makes relief available only in situations where furniture and furnishings (including white goods and kitchenware) are actually replaced.
The amount of the available deduction is now calculated as follows:
- The cost of the new replacement item, limited to the cost of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent) plus –
- The incidental costs of disposing of the old item or acquiring the replacement, less –
- Any amounts received on disposal of the old item