Almost half (47 per cent) of landlords will be affected by the removal of the annual wear and tear allowance, according to new findings from the National Landlords Association (NLA).
The research findings show that a quarter of landlords (24 per cent) let their properties fully furnished, with 22 per cent letting a mixture of furnished and unfurnished properties. Just over half of landlords (53 per cent) let their properties on an unfurnished basis.
The news comes shortly after the government announced its intention to scrap the annual wear and tear allowance – which is only available for furnished properties – and replace it with a tax relief system that enables all landlords to deduct the costs they actually incur on replacing furnishings in the property.
The new system, currently under consultation until the 9th of October 2015, will apply from 6 April 2016 for Income Tax purposes and 1 April 2016 for Corporation Tax, and will cover the cost of replacement furniture, furnishings, appliances and kitchenware provided for tenants including:
- Movable furniture and furnishings
- Carpets and flooring
- Crockery or cutlery
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.
“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.
“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”.