Wear and Tear was an allowance that landlords with furnished rental property could use annually to offset the cost of replacing furniture, white goods and other ‘moveable’ items. This included washing machines and freezers, carpets, crockery and soft furnishings. The 10 per cent was standard across the board i.e. landlords could claim the reduction whether they had replaced goods that year or not. In other words, it was automatic. ‘Fixed’ furnishings e.g. baths and boilers come under capital expenses so didn’t apply.
The 10 per cent was from net rental income i.e. rents minus bills the landlord paid, but the tenant was liable for. This included TV, broadband and even utilities if it applied.
Unfurnished landlords could only apply for Wear and Tear if it was integrated appliances such as a fridge, cooker etc.
So far, we’ve been referring to the Wear and Tear Allowance in the past-tense. And that’s because, from 6 April 2016 it could no longer be claimed by landlords. Instead the government have updated it and renamed it to Replacement Relief.
New Replacement Relief Allowance
Replacing the item on a ‘like for like’ basis. This does away with the automatic 10 per cent reduction. Now landlords have to prove that they did indeed replace furniture, white goods etc. by verifying with a receipt. Not only that, but the replacement item must be an improvement on the previous one and is capped at the cost of a modern equivalent. If, for example you want to replace an old wooden drop leaf dining table, then you can’t go out and buy an expensive smoked glass version. Well, you could, but you’d only be able to claim for a similar wooden table. So, if the smoked glass table cost £800, but the cost of an equivalent wooden version was only £400, then your claim could only be for £400.
Transport and installation costs. As a bonus though, you can also claim for disposing of the old item and both transporting and installing the new one (e.g. for white goods and IT). However, if you sell the old one for cash, then this must be deducted from the Replacement Relief claim.
Other stipulations. The replacement item mustn’t be used by the landlord, but be for the sole use of the tenant. Replacement Allowance is only for residential and not commercial property or holiday lets.
Landlords of furnished properties. The good news for landlords of unfurnished and part-furnished property is that they can now claim Replacement Relief too – although only if the furniture has already been there for some time i.e. the landlord of a furnished property can’t suddenly go out and furnish it by claiming Replacement Relief. In other words, a new item must genuinely be a replacement for an older version.
Tenancy Deposit Wear and Tear
Confusingly, the concept of Wear and Tear does exist in terms of tenancy deposits i.e. a landlord can deduct an amount from a tenant’s deposit if he feels furniture or some other item has been damaged beyond what would be considered normal usage (wear and tear). This has to take into account the state of the item when the tenant moved in, how long he or she had been there for and the number of tenants. Also, how long a similar item would be expected to last for.