The Wear and Tear Allowance used to enable landlords who rented out a furnished property to claim back 10% of the net rent each year. It has, however, been replaced by the Replacement of Domestic Items Relief. This now means that landlords have to claim the cost of replacing items individually.
It’s important to be aware that you can’t claim the replacement of domestic items relief if you are also claiming the Rent a Room relief or if the property is a furnished holiday letting such as an AirBnB. The Rent a Room scheme allows you to earn up to £7,500 a year tax-free by renting out a part of your home, as long as you also live there. If what you earn from renting out the room is less than £7,500, you don’t even need to declare it to HMRC. It’s completely exempt from tax and does not count towards your Personal Allowance.
If you make more than £7,500, you still have to file a Self Assessment tax return, but you can claim £7,500 as a flat tax-free allowance.
Landlords pay both Income Tax and National Insurance by filing a Self Assessment tax return, just like a self-employed business owner.
If you are a landlord, remember to file your Self Assessment by 31st January the year after the tax year you’re paying for. For example, if you’re paying your 2023/2024 tax return, this should be paid by 31st January 2025.