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HMRC internal manual

Property Income Manual

Furnished lettings: Wear & tear allowance: Calculation - 2011/12 onwards

ITTOIA/S308C, CTA09/248C

The wear and tear allowance is 10% of the “relevant rental amount”.

The “relevant rental amount” is:

  • The receipts from furnished residential lettings recognised in arriving at the profits for the period LESS
  • Any expenses that would normally be borne by the tenant

The receipts include the taxable element of any lease premium or reverse premium received (see PIM1200 onwards).

If the landlord pays any expenses that would normally be borne by the tenant, then these are deducted from the receipts to arrive at the relevant rental amount. The type of expense that would fall to be deducted include the utilities bills (gas, water, electricity), council tax or, in Northern Ireland, domestic rates.

The 10% is calculated only on the net rent from the furnished lettings. Any rent from unfurnished lettings is excluded from the calculation as are any expenses from these lettings that would normally be borne by the tenant.
 
What the 10% wear and tear allowance covers

The 10% wear and tear allowance covers things like:

  • movable furniture or furnishings, such as beds or suites,
  • televisions,
  • fridges and freezers,
  • carpets and floor-coverings,
  • curtains,
  • linen,
  • crockery or cutlery,
  • beds and other furniture

This list is not intended to be complete but gives an idea of the assets the wear and tear allowance covers.

What the 10% wear and tear allowance does not cover

The wear and tear allowance relates to the additional furniture and fittings that make it a furnished letting. It does not apply to the fixtures that are an integral part of the buildings.

Fixtures integral to the building are those that are not normally removed by either tenant or owner if the property is vacated or sold. Examples include:

  • Baths
  • Washbasins
  • Toilets
  • Immersion heaters

This list is not intended to be complete but gives an idea of the assets that are integral to the building and fall outside the wear and tear allowance.

As these items are integral to the building, the cost of replacing these items is normally an allowable expense as a repair to the building.

Guidance on when replacing an item is a repair to a larger entirety can be found in the Business Income Manual