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We usually recommend landlords review their rental property regularly and consider redecoration or refurbishment according to the rental and the amount of wear and tear.\u00a0 Sometimes a simple refresh of d\u00e9cor and soft furnishings is enough, but lucrative corporate tenants<\/a> expect to rent a managed property that is up to date. The days when tenants would accept shabby decor or furnishings are long gone and a tired-looking apartment will take longer to let in a competitive rental market.\u00a0 \u00a0An older property may need more maintenance on a regular basis and improvements such as installing a new kitchen or bathroom will help secure a quicker let and keep voids<\/a> to a minimum.The good news is that there are allowances that you can claim against some refurbishment works but there are key points to consider to ensure you stay within HMRC\u2019s regulations. <\/p>\n If an item is replaced with an improved item, the cost of the element of the replacement item that reflects the improvement is not allowable.\u00a0 HMRC give an example of a washing machine that would cost \u00a3400 which is replaced by a washer dryer costing \u00a3600.\u00a0 In this case only \u00a3400 can be claimed as an expense.\u00a0\u00a0And if you replace an old sofa (which would have cost you \u00a3400 to replace) with a sofa bed instead which costs you \u00a3550, you can only claim \u00a3400 as a deduction and no relief is available for the \u00a3150 difference.<\/p>\n You can also deduct allowable expenses from your rental income if these restore a property to its original condition and are solely for the purpose of letting the property.\u00a0Anything that is a fixture to the building and is replaced with an equivalent item is deductible.\u00a0 Fixtures are considered as anything that would not be removed by an owner if the property was sold such as a bath, toilet, boiler and kitchen units.\u00a0\u00a0These could include general maintenance and property repairs such as replacing broken roof tiles or a broken boiler.It is important to remember that the replacement can only be claimed as an allowable expense if the new item\/work is of a similar quality – it must not be an improvement.\u00a0\u00a0Maintenance and repairs are also considered to be allowable expenses if they restore the property to its original condition.\u00a0 The cost of redecoration between tenancies to restore the property to its original condition can be deducted from rental income.\u00a0 However, if you replace carpets with a new wood floor then this cannot be claimed as it is seen to be an improvement.Similarly, if you replace an outdated kitchen with a new kitchen of a similar quality then you can deduct the cost from rental income.\u00a0 But if the new kitchen is of a higher specification than the original, you can only claim for the cost of a kitchen of similar quality – you cannot claim for the improvement.\u00a0\u00a0If the deductible expenses in a single year are more than the rental income this will generate a loss which can be carried forward and set off against future rental income.<\/p>\n Capital expenses such as building an extension or installing a security system if the property didn\u2019t already have one are not allowable.\u00a0 But it is worth keeping records and receipts as you might be able to set them against Capital Gains Tax if you eventually sell the property.You can find more useful information on tax allowances from HMRC here.<\/p>\n It is important to remember that upgrading facilities such as kitchens and bathrooms ensure a rental property lets more quickly, sometimes for a higher rent, helping you achieve a higher rental yield.\u00a0Enhancing the presentation and appeal of a rental property<\/a> is therefore even more important in maximising return on investment than solely taking advantage of the tax allowances available so you should always evaluate the effect any refurbishment work will have on your potential asking rental.<\/p>\n It can be difficult to decide whether something is a replacement, an improvement or a capital expense – it is not always clear cut.\u00a0 Many cases may need to be decided on an individual basis according to the work that has been carried out – we would therefore suggest landlords seek advice from an accountant who can advise on what you can claim.<\/p>\n If you are an overseas investor, we also have this comprehensive tax guide that can help inform you better. For more property news, advice and updates, subscribe to our newsletter.<\/p>\n","protected":false},"excerpt":{"rendered":" We usually recommend landlords review their rental property regularly and consider redecoration or refurbishment according to the rental and the amount of wear and tear.\u00a0 Sometimes a simple refresh of d\u00e9cor and soft furnishings is enough, but lucrative corporate tenants expect to rent a managed property that is up to date. The days when tenants … <\/p>\nReplacement of Domestic Items Relief<\/h2>\n
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First, you can deduct the actual cost of replacing furnishings in your rental property from your profit before tax \u2013 this is known as Replacement of Domestic Items Relief.\u00a0 (Before April 6 2016 there was a Wear and Tear allowance of 10% of rent received, regardless of how much you had actually spent.)\u00a0\u00a0You can claim a deduction for the cost of replacing domestic items such as movable furniture, household appliances and kitchenware – including sofas, beds and other furniture, TVs, fridges, freezers, carpets and floor coverings, curtains, crockery, cutlery and linen.\u00a0 This means there is now a real incentive to replace old or worn items in order to maintain the property\u2019s interior.It is important to keep full and accurate records of any expenditure if you replace any of these items.\u00a0 The initial cost of furnishing a rental property<\/a> is not covered however.\u00a0\u00a0Any new items must be a replacement and not an improvement, in order to qualify for this relief.<\/p>\nHow do you decide whether an item is a replacement or an improvement?<\/h2>\n
Allowable expenses including maintenance and repairs<\/h2>\n
Capital expenses<\/h2>\n
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The advantages of refurbishing and upgrading a rental property<\/h2>\nMore information on tax allowances<\/h2>\n