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More changes for landlords of residential property

In February I blogged about some of the major changes to tax legislation which are going to affect those letting residential property in the next few years, including restriction of tax relief on interest, an increase in stamp duty and the requirement to report and pay CGT on sales within 30 days.

Here are another couple of changes which are coming in from this April.

Wear and tear allowance
Until 5 April 2016, landlords providing furnished accommodation are able to claim tax relief by way of a ‘wear and tear’ allowance. This is a flat-rate tax deduction equivalent to 10% of the ‘relevant rental amount’. The relevant rental amount is the gross receipts from furnished residential letting less any expenses borne by the landlord that would normally be borne by the tenant, for example utility bills.

This allowance is meant to cover costs relating to items such as movable furniture or furnishings, beds or suites, televisions, fridges and freezers, carpets and floor-coverings, curtains, linen and crockery or cutlery.

With effect from 5 April 2016, the wear and tear allowance will no longer be available and landlords will be able to claim relief on a replacement basis. This relief will cover the same types of expenditure as was relieved by the wear and tear allowance.

Under the replacement relief no relief will be given for the initial expenditure, only for the actual cost of replacing such assets.

If landlords are considering replacing such items they should now wait until after 5 April.

Neither the wear and tear allowance nor the replacement allowance give relief for expenditure incurred on fixtures integral to the building such as sanitary wear, immersion heaters, etc. The replacement of such items would continue to be a deductible expense as a repair to the property.

Landlords providing furnished holiday accommodation will not be affected by these changes and they will continue to receive relief under the capital allowance regime.

Rent and room relief
From 6 April 2016 the annual amount which landlords can receive for letting a room in their own home will increase from £4,250 to £7,500.

As always – if you need any expert advice please do not hesitate to get in touch.