Landlords have made their last ever claim for Wear and Tear Allowance in last month’s tax returns (January 31st, 2017).
The allowance, which was scrapped in April 2016, enabled landlords who were renting out ‘furnished to buy’ lets, to claim 10% Wear and Tear Allowance.
The allowance was calculated as 10% of rents after deducting the cost of any services paid on behalf of tenants.
For example: If a landlord rented out a furnished house (annual rent rate £8,400), and paid £600 towards annual bills; the 10% Wear and Tear Allowance would be rent (£8,400) – bills (£600) x 10% = £780.
The allowance was scrapped in 2016 making way for the new Replacement Relief, which can be claimed by both furnished and unfurnished buy to let landlords.
“This new system enables landlords to claim for the actual replacement costs only; claiming the cost of an item plus the disposal costs,” said Peter Way-Rider, Tax Manager at Ellis & Co.
“Landlords need to be aware that they can no longer make the 10% claim at the end of every tax year, and instead will have to claim for replacements as and when they need them.
“Landlords receiving Rent-A-Room Relief or spending on replacements in uncommercial lets and having furnished holiday lettings, are excluded from making claims,” he added.
For further information about Replacement Relief contact Peter on 01244 343504.