The Chancellor’s proposed change to wear and tear tax allowance in the rental sector will hit rural lettings particularly hard, according to a leading accountant.
The new system, applying from April 6 next year for income tax purposes and April 1 next year for corporation tax, replaces an ‘automatic’ 10 per cent wear and tear tax break with tax deductions covering the genuine receipted-cost of replacement furniture, furnishings, appliances and kitchenware provided for tenants including movable furniture and furnishings, televisions, fridges/freezers, carpets and flooring, curtains, linen and crockery or cutlery.
Now Susie Swift, partner in the landed estates and rural business group of chartered accountant Saffery Champness, writes in Farming UK that the new relief will apply to all rented residential properties no matter their level of furnishing - the previous allowance had applied only to fully furnished properties.
However, the relief does not apply to furnished holiday lettings, nor does it apply to the initial furnishing of a property for rental.
“Providers of furnished rural rented accommodation should take note. These are significant changes and, coupled with the proposal to restrict tax relief on property finance costs to basic rate tax relief by 2020, are likely to mean a reassessment of budgets and timings in terms of rented property income projections” she writes.