Findings from an investigation by the National Landlords Association suggest that 47% of landlords will be affected by the abolition of the annual wear and tear allowance.
Changes
Under the changes, the government will scrap the allowance, which is available for furnished properties only. In its place will be a tax relief system that will enable all landlords to subtract costs they incur on replaying furnishings in their property.
Currently under consultation until the 9th October, the new proposals are earmarked to come into force from the 6th October 2016 for income tax purposes. This will changed to 1st April for corporation tax.
The new scheme will cover the price of replacing furniture, appliances and furnishings provided for tenants, which include:
- televisions
- movable furniture
- fridges and freezers
- carpets and flooring
- curtains
- crockery
- cutlery
- linen
Investigation
Research from the National Landlords Association shows that 24% of landlords let their properties fully furnished. 22% let a mixture of furnished and unfurnished property, with 53% letting their properties on an unfurnished basis.[1]
Chris Norris, head of policy at the National Landlords Association said, ‘we fully understand the frustration of those landlords who let exclusively on a furnished basis as the removal of this allowance will very likely represent a reduction in the relief they can claim.’[1]
‘However, it will come as a welcome revision for those letting a mixed portfolio, unfurnished, or part-furnished property as the replacement system will allow them to deduct legitimate revenue expenses in the future,’ he added.[1]
Concluding, Mr Norris said that, ‘the NLA has broadly welcomed these proposals as it should lead to a fairer system for more landlords. However, as we transition from one system to another, we will push to make sure that any landlords who’ve made recent investments with the expectation of offsetting the cost over a number of years using the current allowance, will not be disadvantaged. [2]
[1] http://www.propertyreporter.co.uk/landlords/removal-of-wear-and-tear-allowance-will-affect-half-of-landlords.html
[2] https://www.landlordtoday.co.uk/breaking-news/2015/8/half-of-landlords-affected-by-removal-of-wear-and-tear-allowance