Replacement furniture relief - how does it work?

Remember the old 10% wear and tear allowance on furnished properties, allowing a deduction each year to be offset against rental income? Well it’s now been three years since it was replaced by the Replacement Relief.

The idea was sold as being good for the rental property market and increasing the standard of living conditions of the renters. However, a 10% allowance for landlords without having to spend any money was a nice easy allowance to take away and increase taxes.

The relief allows you now to claim for the expense of replacing an item of furniture when it actually happens. However, be aware that there are some exceptions, which include:

  • The initial cost of putting furnishing in a property is not allowable, but those items then become the starting point for future replacements.
  • Items have to be replaced on a like for like basis, so a washer/dryer replacing a washer means you wouldn't be able to claim for the cost of the new machine, only a portion. However, the washer/dryer then becomes the starting point for future purchases.
  • Consider material quality, such as woollen carpets replacing synthetic ones as this is not allowable either due to the quality being much better.

Anything that has been upgraded simply because technology has moved forward is an allowable expense.

Check out HMRC website for further information https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

So how is this all going to be monitored? Well unfortunately, there is no guidance, so we highly recommend that if you are going to furnish a property that you take photos of everything, and every time it's replaced. This will help to avoid any future assumptions made by HMRC that could lead to an increase in tax.

You could, in theory, furnish a house using second hand goods from wherever you can find them, as long as they are useable and then simply replace with similar ones, just new, before the tenant moves in. There is no indication on time limits or restrictions on such items. It would be difficult for HMRC to challenge this approach.

As ever, we are always here to help and advise should you need support so please contact us today should you want to discuss this further.

We can help you with a whole range of tax related services, specifically for landlords, investors and developers, which you can find out more about here.

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