The government plans to reform how buy-to-let landlords can account for the costs they incur in improving and maintaining their property. Under the current system, landlords of furnished property are able to deduct 10% of the rent they receive from their profit to account for wear and tear, regardless of their actual expenditure.
The new plan is to replace Wear and Tear Allowance with a relief that “enables landlords of residential dwelling houses to deduct the costs they actually incur on replacement furnishings in the property.” It is intended to give greater “consistency and fairness” across the lettings sector. The proposals will apply from April 2016.
According to research from the National Landlords Association, 47% of landlords will be affected by this change. 24% of landlords let their properties fully furnished, 22% have a mix of furnished and unfurnished properties, while 53% only let unfurnished properties.
Chris Norris, head of NLA policy, said: “The NLA has broadly welcomed these proposals as it should lead to a fairer system for more landlords. However, as we transition from one system to another, we will push to make sure that any landlords who’ve made recent investments with the expectation of offsetting the cost over a number of years using the current allowance, will not be disadvantaged.”
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