What tax allowances are there for refurbishing my London rental property?
It’s important for landlords to refurbish their rental property regularly to ensure it looks its best and in order to let quickly in a competitive rental market.
There are tax allowances to help with the cost of this. If the landlord is replacing movable furniture, household appliances and kitchenware such as sofas and beds, televisions, fridges, carpets and floor coverings, curtains, crockery, cutlery and linen, they can deduct the cost from their profit before tax – this is called Replacement of Domestic Items Relief. To qualify, new items must be a replacement and not an improvement.
For example, if the landlord replaces an old sofa with a similar one which costs £400, this qualifies. If they replace it with a sofa bed which costs £550, they can only claim £400 as a deduction – no relief is available for the £150 difference as this element is seen as an improvement.
Until April 2016 landlords could claim a wear and tear allowance of 10% of rent received but this is no longer available.
Landlords can also deduct allowable expenses from their rental income if they are replacing fixtures with an equivalent item. This can include a bath, toilet, boiler and kitchen units. It includes maintenance and repairs (such as replacing broken roof tiles) which restore the property to its original condition.
For example, the cost of redecoration between tenancies to restore the property to its original condition can be deducted from rental income. However, if carpets are replaced with a new wooden floor this cannot be claimed as it is considered an improvement.
Capital expenses such as building an extension are not allowable. If unsure whether work qualifies for relief, landlords should consult an accountant.
They should also remember that upgrading a property will enhance its tenant appeal and ensure it lets more quickly, possibly for a higher rent – so tax allowances are not the only consideration.
Benham and Reeves Residential Lettings