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Residential let property

The rules on claiming some expenses against rental income changed in 2013/14. Prior to that, whilst the initial costs of things like furniture, white goods, carpets etc was never allowable, you could claim for the replacement of such items. And if the property was let fully furnished, you could either choose to claim for replacement costs or alternatively, a Wear & Tear allowance calculated by reference to the gross rents less any council tax or water rates if paid by the landlord. Unfurnished lets were only allowed to claim for replacement costs.

Since April 2013, you can no longer claim for replacements. So all furnished lets can now only claim the 10% Wear & Tear Allowance but landlords letting out unfurnished properties can no longer make any claim for items such as white goods, carpets etc.

Accountants complained to HMRC about this new treatment and eventually HMRC made two small concessions. If things such as white goods are of the integrated variety, then their replacement can be classified as a repair and claimed for. But free standing fridges etc can never now be claimed for.   And small items that may need regular replacing such as cutlery, can be claimed for, but remembering this is replacement costs, never the initial purchase.

Furnished holiday letting

The rules for furnished holiday lets (FHLs) are quite different. Whilst general residential letting is viewed by HMRC as investment income, FHLs are treated a little more like trading income. This means that you may be able to claim certain reliefs against Capital Gains Tax on eventual sale and the income counts towards your earnings when calculating how much relief you can obtain on pension contributions. However, there are hoops to jump through in order to qualify for FHL treatment and these can be found at https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet/hs253-furnished-holiday-lettings-2015

There has also been a change for FHLs in that losses can no longer be claimed against general income, only against other letting income of the same year or carried forward to use against future letting income.

One additional advantage to having a FHL is that the costs of items such as furniture and fixtures etc can be claimed under the capital allowances rules.