When George Osborne presented the Summer 2015 Budget he did not mention anything about the withdrawal of the 10% Wear and Tear Allowance. However both the Red Book and the Green Paper included this.
For those of you with furnished properties you may be despairing at this loss. However it is not the bad news that it first appears to be. The reason for this is because the legislation is re-introducing Replacement Allowance from 6 April 2016 and HM Revenue & Customs are consulting how this will work in practice
So what does this mean? Well for our clients we are advising them to hold off replacing freestanding white goods, floor covering and curtains. Why? Because these are the items that the 10% Wear and Tear Allowance covered.
From 6 April 2016 all such allowance will be allowed as a direct deduction from rental income in exactly the same way as repairs currently are allowed. The only exception to this relief is where there is an element of improvement/change to the items.
HM Revenue & Customs use the example of replacing a washing machine with a washer dryer – in this case they say you can only recover such value as matches the cost of simply replacing the washing machine.
The other good news is that this relief will be available for all property that is let not just furnished property.
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Telephone: 0333 210 1717