What income tax allowances are you entitled to when you rent out residential property?

If you receive rental income from residential property you are required to pay income tax on the profit you make.

Your profit is added to your other income to determine how much income tax you pay.

In order to arrive at your taxable profit, you are allowed to deduct qualifying revenue expenses (day-to-day running costs) and tax allowances. Recent change in one of those allowances has caused some confusion, and so we aim to provide a brief explanation.

Until 5^th April 2016, wear and tear allowance was available as an income tax deduction when the property was let fully furnished: from 6^th April 2016 that allowance was superseded by replacement of domestic items relief.

The range of properties covered by the new replacement of domestic items relief has been expanded to include properties rented as unfurnished, part furnished or fully furnished.

It is important to note that the item must represent a replacement (like-for-like), and not an improvement (or upgrade), otherwise only part of the expense will be allowed as a deduction.

Some confusion is also caused when deciding whether the expense should be classified as maintenance/repair or replacement.

ad+ has extensive experience in preparing accounts and subsequent negotiation with HMRC on all aspect of residential property letting income.

Please get in touch if you would like to discuss your own tax position