Finance Bill 2016: Reform of the Wear and Tear Allowance

A deduction for a “wear and tear” allowance is available for landlords letting fully furnished properties at a rate of 10% of rents less rates.

Legislation has been included within Finance Bill 2016 to repeal the wear and tear allowance with effect from 1st April 2016 for Corporation Tax payers and from 6th April 2016 for Income Tax payers. Instead a deduction for the replacement of furnishings will be available against rental income. The new provisions will not be available for furnished holiday lettings.

The removal of a general allowance and the implementation of a deduction for expenditure will prevent landlords from obtaining a tax deduction without incurring a cost. It may also encourage landlords to replace furnishings at an earlier date to obtain tax relief.