Wear and tear - tax implications for property owners letting out

biscit

I'm in the process of noting down some figures for my tax return on my house that is currently being let out.

I'm told I can claim 10% wear and tear, but not able to get a clear picture on 10% of what.

One source told me it was 10% of the gross rental income, another said 10% of the rental income after expenses (which after mortgage interest, and agency fees is already a loss, before adding in maintenance and safety checks.)

Any ideas? The property may next year make a profit, and I understand losses can roll over...

00ec25

HMRC set the rules so why not ask uncle google to find the answer

hint: read the 2nd para of the what the 10% wear and tear allowance covers point

mortgage interest is not deducted to get the net rent figure for the purposes of W&T as it is not a cost which the tenant would normally pay, although obviously it is deducted to get your taxable net profit

Example A – tenant pays the eligible costs
gross rent received £6000 pa

LL costs
mortgage interest £2000
gas safety cert £100
service charge £1000
tenant costs
council tax £1800
water £400
gas and electric £900

W&T net rent £6,000 – LL eligible costs £nil = £6,000
W&T 10% allowance £600
Net taxable profit 6000 – 2000-100-1000-600= 2,300


Example B - LL pays the eligible costs
gross rent received £6000 pa

LL costs
mortgage interest £2000
gas safety cert £100
service charge £1000
council tax £1800
water £400

tenant costs
gas and electric £900

W&T net rent £6,000 – LL eligible costs - £1800-400 = £3,800
W&T 10% allowance £380-
Net taxable profit 6000 – 2000-100-1000-1800-400-380 = £320

FTBFun

The calculations is this:

10% of (gross rents - council tax you pay - water you pay).

Remember you can't claim for replacement of any furniture etc whilst you are also claiming the wear and tear allowance.

Regshoe

Also Make sure you don't fall foul of this section in the guidelines:

A furnished property is one that is capable of normal occupation without the tenant having to provide their own beds, chairs, tables, sofas and other furnishings, cooker etc. The provision of nominal furnishings will not meet this requirement. If the accommodation isn’t furnished, or only partly furnished, the 10% wear and tear allowance isn’t due.

taxsaver

Also be clear that this allowance does ONLY apply to fully furnished property and is NOT available to you if you let the property unfurnished, which is by far the most common method of letting.

biscit

taxsaver wrote: »

Also be clear that this allowance does ONLY apply to fully furnished property and is NOT available to you if you let the property unfurnished, which is by far the most common method of letting.

It is furnished, yes. I may ignore W&T this year, though, to simplify things, as we make a loss even without it.

Thanks all for your input everyone, you've all been helpful.