Maximising Tax Relief on Domestic Item Replacements: A Landlord’s Guide

As a landlord, replacing worn-out furnishings or outdated appliances in your rental properties is part and parcel of the job.

Here’s some good news, though: these necessary updates could actually help reduce your tax bill.

What’s known as the “replacement of domestic items relief” is a lesser-known form of tax relief that many landlords neglect. 

In this blog, we’ll explore this often overlooked form of landlord tax relief. We’ll break down what it covers, how it works, and,, most importantly, how you can make the most of it. 

What is the Replacement of Domestic Items Relief?

Introduced in April 2016, domestic items relief replaced the old Wear and Tear Allowance. It allows landlords to deduct the cost of replacing furnishings, appliances and kitchenware in their rental properties from their taxable income.

Unlike its predecessor, this relief applies to both furnished and unfurnished properties. This offers more flexibility for landlords, regardless of how they choose to let their properties.

What Qualifies for Domestic Items Relief?

The relief covers a wide range of items that you might need to replace in your rental property. It covers:

1. Moveable furniture (e.g., beds, sofas, wardrobes)
2. Furnishings (e.g., curtains, rugs, carpets)
3. Household appliances (e.g., fridges, washing machines, televisions)
4. Kitchenware (e.g., crockery, cutlery, cooking utensils)

Notably, fixtures integral to the building, such as fitted kitchens or bathrooms, don’t qualify for this relief. 

These are typically covered under different tax rules related to property maintenance and improvement.

Calculating Your Relief

You need to consider several factors when calculating the amount you’re entitled to. 

Here’s what you need to take into account:

1. The cost of the new item
2. Any costs for disposing of the old item
3. Costs for delivering and installing the new item

If you sell the old item, you need to deduct this amount from your claim.

Key Principles to Remember

There are two principles to keep in mind when claiming this relief. These can affect how much you’re able to claim. 

• Like-for-Like Replacement: If you’re replacing an item with a superior version, you can only claim relief up to the cost of a like-for-like replacement. This doesn’t mean you’re restricted to outdated technology, but major upgrades may limit your claim. 
• Part-Exchange Deals: If you part-exchange an old item for a new one, you can only claim the additional amount you pay. This is an important consideration when deciding how to dispose of old items.

Note: HMRC’s manual does specify that new items will cost more due to inflation. So, a like-for-like replacement for a £200 washing machine bought 20 years ago is sure to cost more today. You can claim the present-day cost, so long as the item isn’t a major upgrade. 

A Practical Example of Calculating Domestic Item Replacements

Let’s look at an example that illustrates how this relief works in practice. 

Consider that you’re replacing a sofa in your rental property. Here are the details:

• New sofa cost: £600
• Delivery charge: £50
• Old sofa removal cost: £30
• You sell the old sofa for: £100

Calculation: £600 (new sofa) + £50 (delivery) + £30 (old sofa removal) – £100 (sale of old sofa) = £580

So, £580 is the amount you can deduct from your rental income before calculating your tax.

Exceptions to Be Aware Of

While this relief is widely applicable, there are some situations where it doesn’t apply.

1. Furnished holiday lettings are not eligible for this relief. Different rules apply to these properties.
2. If you’re using the Rent a Room scheme, you can’t claim this relief for items in the room you’re letting.

Practical Tips for Maximising Your Relief

There are several strategies to maximise domestic items relief while staying compliant with HMRC rules:

1. Keep detailed records of all replacements, including costs and dates.
2. Consider timing your replacements across different tax years if beneficial.
3. Don’t forget to include delivery, installation, and disposal costs in your claim.
4. Regularly assess the condition of items in your properties for timely replacements.

How to Claim Domestic Items Replacement Relief

Claiming the relief is a straightforward process. You’ll log the costs on your self-assessment. Here’s how it works:

1. Keep detailed records of all replacements throughout the tax year.
2. When completing your Self-Assessment tax return, look for the “Allowable property expenses” section in the property income section.
3. Enter the total amount you’re claiming for replacing domestic items.
4. In the “Any other information” box, briefly explain how much the amount relates to domestic item replacements.

Get Expert Help from Double Point

Property taxation can be tricky, and the rules around the Replacement of Domestic Items Relief are no exception. While this guide provides an overview, every landlord’s situation is unique.

At Double Point, we can help landlords like you understand domestic item replacements and other property rules and reliefs. 

We can review your specific circumstances, ensure you’re claiming everything you’re entitled to, and help you develop a tax-efficient property investment strategy.

Why not book a consultation with us? Let’s work together to keep your rental business thriving and tax-efficient.