What is replacement of domestic items relief for landlords?

Full answer

Replacement of domestic items relief allows landlords letting residential property to deduct the cost of replacing 'domestic items' provided for the tenant's use. These include movable furniture, furnishings (carpets, curtains, linen), household appliances (fridges, washing machines, cookers) and kitchenware. It replaced the old 10% wear-and-tear allowance. Who it affects: landlords of let residential dwellings declaring rental income through Self Assessment. It does not apply to furnished holiday lets that qualify for capital allowances, nor to 'fixtures' that form part of the building (a fitted kitchen unit or boiler is a repair, not a domestic item). The core rules: you cannot claim for the initial purchase of an item - only for a later replacement. The deductible amount is the cost of a broadly equivalent replacement. If you upgrade to something better, you can only claim what a like-for-like replacement would have cost, not the improvement element. You then deduct any money received for the old item (or scrap value) and add any disposal costs. Worked example: you replace a worn sofa, selling the old one for GBP 50. A like-for-like sofa costs GBP 600, but you buy a superior model for GBP 900. Your claim is the like-for-like GBP 600 minus the GBP 50 received, so GBP 550 is deductible against rental profit. The extra GBP 300 for the upgrade is not allowable. The relief reduces your taxable rental profit, so its value depends on your marginal rate - worth 20%, 40% or 45% of the deduction. Keep receipts and records of any sale proceeds. To see how the saving flows through to your overall position, use the income tax or self-employed tax calculator. Precise eligibility for borderline items should be checked against current gov.uk guidance.

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