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Rental accounts – the 10% wear and tear rule

17th December 2010

An oft misunderstood rule is the 10% wear and tear allowance. This is one of the best tax allowances available for landlords. Essentially, 10% of rents (less any utilities/council tax/any other bills that a tenant would usually pay) is subtracted from the rent.

However, you must choose between this treatment or the “replacements method” where you claim a tax deduction for the property’s appliances – fridges, furniture, washing machines, soft furnishings, white goods – things that aren’t fixed in general.

It is not possible to “chop and change” or to treat some items under one treatment with the rest of the items under the other treatment.

So, which to choose? Generally, the 10% wear and tear is a superior method but it depends on the value of the items and how often you need to replace them.

Please note that

1. You can still claim on the repairs of all the above items. You can also claim a deduction on the replacement (but not addition) of integral features of the property (structure, walls etc.) so long as they are not a marked improvement on what was there previously. You are advised to speak to a firm of chartered accountants on this point.

2. the 10% relief only applies to furnished accommodation (guess what we would advise!)