Which Replacement Fixtures and Furnitureare Tax Deductible for Rental Properties?
Posted: Oct 31, 2015
If you rent out an apartment or house for some length of time then it is likely you will have to repair or replace certain items during a tenancy. Youwill beable to offset against tax certain costs for the maintenance and repair of the property, but the rules around the types of expenses that can be included to reduce your tax bill can be confusing so make sure you understand the rules.
Firstly you must clearly distinguish between furnishings and fixtures because this is critical to correctly claiming what you are entitled to deduct. You certainly do not want to miss out on any tax reliefs due to you as a landlord but, equally, you do not want to claim for items that are not allowed.
In tax termsin the UK Fixtures & Fittings are classified differentlyfrom Furnishings & Equipment so let's take a look at what this means in practice for you as a landlord.
Fixtures and Fittings
Fixtures and Fittings are generally any item that is a permanent feature of a home – the type of things that you would expect to be left there if you had bought the property (although sometimes opinions of what these are differ when buying and selling property!). But, for tax purposes these items include baths, showers, sinks, WCs, fitted furniture such as wardrobes and kitchen units, boilers, light switches and light fittings.
Furnishings and Equipment
Furnishings and equipment, on the other hand, are items that can easily be moved and that you would consider your personal possessions so would most probably take with you if you sold the house or apartment, unless you had specifically agreed otherwise. They are things such asfridges, freezers and washings machines (provided they are not built in), beds, tables, chairs, sofas, curtains and carpets.
Replacing Fixtures and Fittings
The cost of repairing or replacing a fixed item is considered an expense to offset against the rental income you receive, provided the replacement is equivalent to the old or broken item and not a significantly better version. So you could actually replace a whole fitted kitchenbut only with one of a similar standard and you could only claim for items actually being replaced. So if, for example, the new kitchen had integrated appliances but previously had free-standing appliances then those costs would not be tax-deductible. In situations like this it is, therefore, imperative to have each replacement item clearly listed and costed separately.
Replacing Furnishings and Equipment
Replacing Furniture or Equipment in a residential property is only tax-deductible if the property is a certain type of holiday let. However, for other properties you can claim wear and tear on furnishings instead at a rate of 10% of the rental income.
Partly furnished property
Changes to the law in 2013 mean that if yourent out an unfurnished or partly furnishedproperty then no tax relief is available for replacing items. Clearly an easy way around this is to fully furnish the house or apartment but if youthink you could bepaying too much tax, especially if you rent our multiple properties then you should be consulting a tax advisor or London accountants. As with many things related to tax reliefs and what exactly you can claim, the rules are not simple and there are quite specific areas included in, or excluded from, certain types of relief so make sure you do not fall foul of the law by taking professional advice.
The author has written and published articles on a wide range of topics including Small Business Advice, Tax and Accounting, Interior Design, House Renovation and Project Management.