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How Removing The Wear And Tear Tax Allowance Affects Landlords


Tuesday, August 18, 2015
Removal Of Wear And Tear Tax Allowance Doesn’t Have To Mean Landlords Face Property Losses

Removal Of Wear And Tear Tax Allowance Doesn’t Have To Mean Landlords Face Property Losses

Removal Of Wear And Tear Tax Allowance Doesn’t Have To Mean
Landlords Face Property Losses

Since the Chancellor of the Exchequer announced in the post election budget that the wear and tear tax allowance for landlords was to be phased out and replaced with a tax relief system that only allows landlords to deduct costs actually incurred when replacing furnishings in rented properties, there has been plenty of discussion among landlords as to how they can best mitigate their end of tenancy expenses without being forced to make huge deductions from tenant’s deposits.

There are specialist insurance policies available to landlords and letting agents that can help in this case providing insurance for tenants to help them protect their deposit against accidental damage to a rental property.

Thousands of PRS landlords have already begun a petition to lobby the Government in an attempt to reverse the planned tax relief restriction on ‘individual’ landlords, asking for the planned restriction be reconsidered as it has unfair implications.

Landlords incur costs operating rental property businesses and the planned tax restrictions outlined will unfairly target the sector by preventing landlords from offsetting costs in the same manner as other business owners.The private rented sector is heavily reliant on individual landlords and the proposed changes are likely to result in increasing rents as landlords look to offset increased tax liabilities.

UK PRS landlords and letting agents can sign the Government petition here

According to data published by the National Landlords Association, (NLA) 47% of private rental sector landlords will be affected by the removal of the annual wear and tear allowance, which will increase operating costs.

The NLA research found that:

  • 24% of PRS landlords let their properties fully furnished
  • 22% of PRS landlords let a mixture of furnished and unfurnished properties
  • 53% of PRS landlords let their properties on an unfurnished basis

The new tax relief system is currently under consultation until the 9th of October 2015 and will apply from 6 April 2016 for Income Tax purposes and 1 April 2016 for Corporation Tax.

The new tax relief will cover the cost of replacement furniture, furnishings, appliances and kitchenware provided for tenants including:

• Movable Furniture And Furnishings

• Televisions

• Fridges/Freezers

• Carpets And Flooring

• Curtains

• Linen

• Crockery Or Cutlery

Determining fair wear and tear is probably the most difficult and misunderstood areas of renting property as letting agents and landlords may have different views to tenants regarding allowable deductions to be made from the tenant’s deposit.

If damage to the rental property has occurred then Tenant’s Liability insurance covers accidental damage claims up to £2,500 (GBP) against accidental damage to furniture, fittings and fixtures in a rental property.

Specialist insurance policies can help landlords and their tenants cover the costs of repairs to fixtures and fittings where damage  exceeds that caused by reasonable use of the rental property and the ordinary operation of natural forces at the end of a tenancy.

Even if the damage is accidental, it is the tenant’s responsibility to pay for such repairs or the landlord would be entitled to deduct the costs from the tenant’s deposit.


This was written by Mike Clarke. Posted on at 11:30 am. Filed under Insurance. Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.