Wear and Tear Allowance was a great allowance for landlords of furnished rental properties until 5 April 2016 reflect general the general wear and tear of furnishings regardless of true spending.  However HMRC have announced that from the 6 April 2016 the end of wear and tear allowance for landlords.

Why Was there An End to The Wear and Tear Allowance?

Until 5 April 2016 landlords could claim a flat rate to reflect the general wear on the furnishings of a rental property such as: sofas, pots and pans or beds.  The allowance was available regardless of true spending, so obviously it was in landlords interests to not replace furnishings but claim for the allowance regardless. In reverse if a landlord had a high amount of furnishings to replace on a regular basis, the wear and tear allowance may not sufficiently reflect these costs.

With the end of wear and tear allowance from 6 April 2016 landlords are now allowed to claim for the costs of any actual replacements to furnishings that they have paid for. So for example if a sofa is replaced, a landlord can claim for the actual cost of buying that new sofa.

Landlord bookkeeping and taxes

How to Calculate Wear and Tear Allowance?

Wear and Tear Allowance is available to landlords renting out a furnished property.  It is a deduction against rental profits and is calculated at 10% of rent less rates (commonly referred to as net rent).

An Example of Wear and Tear Allowance

A landlord rents out a furnished property at £1,200 pcm and pays rates of £1,400 for the year.  Therefore the landlord is able to deduct wear and tear allowance from their rental profits for the year of £1,300.

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.