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Posted on November 20th 2015 by admin-movingin

Private rental repairs deferred because of Osborne tax changes

Research shows that landlords are scaling-back repairs over the winter in order to optimise finances when a new wear and tear tax regime starts in the spring.

According to a firm of chartered accountants, HW Fisher & Company, the changes to wear and tear allowance – under which only work with receipts will be reimbursed – is leading landlords to delay work until April at least.

In its online survey of residential landlords, the firm found 31 per cent intending to spend less than £250 on maintaining furniture and fixtures in the current tax year. 

The figure compares starkly with previous tax years, when 86 per cent of landlords claimed to routinely spend more than £250 per year and one in seven landlords stating they routinely spend over £1,000 a year.

More than twice as many landlords plan to spend the bare minimum – under £250 – on maintenance this year compared to normal years.

The current wear and tear allowance, which the research shows is claimed by 86 per cent of landlords letting furnished property, is paid whether or not they have repaired or replaced furniture and fittings. But from April this will be scrapped in favour of a new system, under which they will only be able to deduct costs they actually incur.

“The new system is intended to be fairer and transparent, only giving landlords tax relief for the money they really pay out. But the impending change has thrown up an anomaly – landlords can spend nothing on maintenance this year and still claim 10 per cent tax relief on their rental income. And they could save more tax on what they do spend if they delay doing so until after April” says Tim Walford-Fitzgerald, tax principal at HW Fisher.