Furnishings

If you are letting a furnished property, and it has sufficient furnishings for the tenant to be able to live there without providing anything more, you are allowed a deduction for the cost of the furnishings and equipment. There are two alternative ways to work out the amount you can deduct as an expense from your rental income. One you have chosen a particular method you must stick with it. The methods are:

a) The wear and tear allowance (of 10% of rents less rates)

This is an amount you are allowed to deduct each year to cover the cost of the equipment and furnishings. Rather than work out exactly what you have spent, you simply deduct a ‘round sum’ each year. The ‘round sum’ is calculated as 10% of your total rental income, less any  charges and services that would normally be borne by a tenant but are, in fact,  paid by you as the landlord (for example council tax, water and sewerage rates etc) . For example, if the annual rent was £6,000, and you did not need to pay the council tax, water and sewerage rates etc, then the annual wear and tear allowance would be taken as a £600 deduction each year.

b) The ‘renewals basis’,

Using this method, you are not allowed to deduct anything you spend on equipment and furnishings when you first let the property. But you may deduct the costs of any replacement item in full in the year you replace them.

For example, you spend £700 on a bed when you first let your property out. You are not allowed to deduct any of this cost from your rental income. After 6 years, you replace the bed, getting nothing for the old one, and spend £950. You may deduct the whole £950 in the year you replace the bed.

If you need a vehicle or equipment like a lawnmower for use in your rental business, you may be allowed to make a deduction for the costs (see HMRC Helpsheet 252 for detailed guidance on this matter http://search2.hmrc.gov.uk/kbroker/hmrc/forms/viewform.jsp?formId=3871).

More information on rental income and expenses can be found on the HMRC website:

Property Income Notes for self assessment http://www.hmrc.gov.uk/worksheets/sa105-notes.pdf

HMRC’s Property Income Manual http://www.hmrc.gov.uk/manuals/pimmanual/index.htm