Landlord Deductions: Replacement Fixtures and Furnishings
Residential landlords are allowed to offset certain costs incurred in maintaining and repairing a property against the rental income they receive. But exactly what types of expenses can be included to reduce a landlord’s tax bill?
As a landlord it is important to understand property tax in the UK because there are several important distinctions to be made before you can decide if an expense is tax-deductible; the first being between furnishings and fixtures.
For tax purposes Fixtures & Fittings are treated differently to Furnishings & Equipment when it comes to landlord deductions.
Fully Furnished Properties
Fixtures & Fittings
These are classified as permanently installed items such as sinks, baths, showers, WCs, fitted kitchen units, integrated appliances such as a dishwasher or fridge, boiler, light fittings. As a general guide these are the types of items that would be left in a property if you sold it.
As a landlord the cost of repairing or replacing such items is an expense that can be offset against your rental income. However, the definition of replacement is quite specific and only equivalent items can be used as replacements. You cannot, for example, replace a basic bathroom with an expensive designer alternative. However, if certain items are a like for like replacement then those individual items could be treated as a claimable expense provided you have clearly itemised invoices.
Furnishings & Equipment
Any items in a rental property that are not fixed and could be easily removed are classed as furnishings or equipment. As a general guide these are the types of items that you might take with you when a property is sold. So items such as tables, chairs, sofas, beds, free-standing white goods and also curtains, rugs and carpets fall into this category.
These types of items are not considered allowable expenses, with a couple of exceptions:
- Certain properties let out only as holiday rentals
- Shared properties with communal hallways (note that communal areas other than hallways are excluded)
However, if you let your properties fully furnished you can claim expenses for wear and tear of certain items as a percentage of the rental income less any other costs paid by the landlord such as council tax.
Landlord deductions on partly-furnished properties
Rental properties that are unfurnished or only partly furnished are no longer allowed to claim for any furnishings or equipment expenses (since April 2013) so it is advisable to consider fully furnishing any such properties to take advantage of the wear and tear allowance. Note, however, that any integrated (fitted) white goods are still treated as fixtures and fittings.
There is also a statutory renewals allowance for essential items that need regular replacement such as crockery and rugs (but not fitted carpets)