Skip to Navigation

Bad news for landlords

Up until April 2013 landlords have been able to take advantage of an HMRC Extra Statutory Concession meaning that the renewals of assets used in a rental business can be set off against their tax liability. This has been important because capital allowances are not available to rental businesses. Unfortunately from April 2013 this Extra Statutory Concession has been withdrawn. That means that landlords of furnished lettings will be able to claim tax relief for wear and tear of furnishings (10% of the gross rents less rates) as previously but landlords of unfurnished lettings will have no claim to make if they replace such items.

Relief will still be due for replacement of items that are deemed to be integral to the building (items that would need to be left in the building when the tenant left or the owner sold up), such as boilers, baths, washbasins, toilets and kitchen units, which will be treated as repairs to the building.

However the following items will no longer obtain tax relief:

  • White goods such as cookers, washing machines, and dishwashers.
  • Carpets and curtains  etc. will no longer obtain tax relief.

What can a landlord of an unfurnished letting do to maximise his tax relief going forward?

  • Repair assets rather then replace them wherever possible.
  • Convert unfurnished lettings into furnished lettings.

In order to be treated as a furnished let a property must have the minimum of:

  • A sofa
  • A bed and mattress
  • A wardrobe
  • White goods
  • Depending on the size of the property a dining room table and chest of drawers

Or even better consider converting an unfurnished letting to a furnished holiday letting. There are many conditions that need to be met to qualify but if you do capital allowances can be claimed on the replacement of fixtures and fittings plus any capital gain on the eventual sale of the property will be taxable at just 10%.

If you have any queries about the contents of this article please contact Jan Friend to discuss.