10% wear and tear allowance

The wear and tear allowance is the relief available to landlords in respect of the cost of replacing assets used within the properties they let. It is only available on residential property that is let furnished.

Since April 2013, landlords of unfurnished residential property are unlikely to be able to claim any tax relief at all for replacing items such as cookers, sinks, baths etc. However, repairing such assets is allowable whether the property is let furnished or not.

The wear and tear allowance is claimed rather than any actual expenditure incurred. It is calculated by taking 10% of the “net rent” received. “Net rent” means you must deduct any charges and services that would normally be borne by the tenant, but are instead being paid for by the landlord. So if the landlord pays for council tax or water rates, these must be deducted from the rent received before applying the 10%.

Provided you continue to meet specific conditions, landlords get the allowance year-after-year; irrespective of what they spend. If expenditure is significant then the allowance may not fully compensate the landlord, but generally the allowance is in the landlord’s favour most years.

To find out more about the wear and tear allowance and what needs to be done in order to qualify for it, please contact your local TaxAssist Accountant . They will ensure that you are obtaining as much tax relief as possible and have your property portfolio structured in the most tax efficient and suitable manner.

Date published 2 Mar 2014

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.