Introduction

For years, landlords of fully furnished residential properties enjoyed a straightforward tax relief known as the Wear and Tear Allowance. This flat-rate deduction allowed you to claim 10% of your net rent automatically, regardless of whether you actually spent anything on replacing furnishings. However, since April 2016, this allowance has been completely replaced by a system called Replacement of Domestic Items Relief (often referred to as “actual cost relief”).

If you’re a landlord who still thinks you can claim that automatic 10%, or you’re confused about what you can now deduct, this guide explains everything you need to know about the change, how the new system works, and how to maximise your legitimate tax relief under the current rules.

Why the Wear and Tear Allowance Was Scrapped

The old Wear and Tear Allowance was introduced decades ago as a simple administrative solution. Landlords of fully furnished properties could claim 10% of their net rent (rent minus certain costs like council tax and utilities if paid by the landlord) as a tax deduction, even if they spent nothing on furnishings that year.

The government abolished this allowance for several reasons:

Unfairness to partly furnished landlords: The 10% allowance was only available for fully furnished properties. Landlords with partly furnished or unfurnished properties received no equivalent relief, creating an uneven playing field.

Windfall for some landlords: Properties with hard-wearing, quality furnishings might need minimal replacement for years, yet landlords still claimed the full 10% annually. This represented a generous tax break that didn’t reflect actual expenditure.

Revenue raising: The Treasury estimated the change would raise approximately £255 million annually by ensuring relief matched actual spending.

The replacement system—Replacement of Domestic Items Relief—now applies to all residential landlords, regardless of whether your property is furnished, partly furnished, or unfurnished.

How Replacement of Domestic Items Relief Works

Under the current system, you can claim tax relief on the actual cost of replacing moveable domestic items in your rental property. This is a “like-for-like” replacement relief, meaning you’re replacing something that’s worn out or broken with a modern equivalent.

What Qualifies as a Domestic Item?

Domestic items include furnishings, appliances, and kitchenware provided for the tenant’s use. Common examples include:

  • Furniture: sofas, beds, wardrobes, tables, chairs, curtains, carpets
  • White goods: washing machines, fridges, freezers, dishwashers, cookers
  • Soft furnishings: bedding, towels, cushions
  • Crockery and cutlery: plates, glasses, pots, pans, utensils
  • Televisions and other moveable items

Importantly, the relief covers all residential properties—whether furnished, partly furnished, or even completely unfurnished. If you provide a fridge in an otherwise unfurnished flat, you can claim relief when you replace it.

What You Can Actually Claim

You can claim the cost of the replacement item itself, plus any associated costs such as:

  • Delivery charges
  • Installation costs (for example, plumbing in a new washing machine)
  • Disposal costs for the old item

However, you cannot claim the original purchase cost when you first furnish a property. The relief only applies to replacements of items that were already there.

The Like-for-Like Rule and Improvements

The relief is designed for like-for-like replacements. You’re replacing a worn-out sofa with another sofa, or a broken fridge with a modern equivalent. You can claim the full cost even if the replacement is better quality or has improved features—technology moves on, and you’re expected to buy what’s currently available.

However, if you significantly upgrade beyond a reasonable replacement, HMRC may restrict your claim. For example:

  • Replacing a basic single bed with a luxury king-size four-poster might be questioned
  • Swapping a standard TV for a top-of-the-range home cinema system could be seen as an improvement

In practice, most reasonable replacements are accepted. If you replace a 10-year-old washing machine with a modern energy-efficient model, that’s clearly acceptable even if it’s technically “better.”

What About Improvements or Initial Furnishing?

If part of your expenditure represents an improvement rather than a replacement, you can only claim the replacement element. For example, if you replace a single bed with a double bed, you might claim the cost of an equivalent single bed, with the extra cost being a capital improvement.

Initial purchases when you first let a property, or when you add items that weren’t there before, don’t qualify for this relief. These costs may potentially be offset against Capital Gains Tax when you eventually sell the property, though this is a complex area where professional advice is essential.

Practical Examples: Old vs New System

Let’s look at how the systems compare:

Example 1: High-maintenance property

You own a fully furnished flat with annual rent of £12,000. Under the old system, you could claim 10% of net rent—around £1,200—regardless of actual spending.

In 2025/26, you actually spend £2,500 replacing a sofa (£800), a washing machine (£450), carpets (£1,100), and various kitchen items (£150).

  • Old system: £1,200 deduction
  • New system: £2,500 deduction

You’re £1,300 better off under the current rules.

Example 2: Low-maintenance property

You own a furnished property with quality furnishings. Annual rent is £15,000. You spend nothing on replacements this year because everything remains in good condition.

  • Old system: £1,500 deduction (10% of net rent)
  • New system: £0 deduction

You’re £1,500 worse off, but you haven’t actually spent anything, so there’s no cash outflow to offset.

Example 3: Unfurnished property

You let an unfurnished flat for £10,000 annually. You provide a fridge-freezer, which breaks down and costs £600 to replace.

  • Old system: £0 (unfurnished properties didn’t qualify)
  • New system: £600 deduction

You’re £600 better off under current rules.

Record-Keeping Requirements

To claim Replacement of Domestic Items Relief, you need robust records:

  • Receipts and invoices: Keep all purchase receipts showing what you bought, when, and for how much
  • Proof of disposal: Evidence you’ve replaced an existing item (photographs of the old item, disposal receipts)
  • Delivery and installation costs: Separate invoices for these associated costs
  • Description of the replacement: Brief notes explaining what you replaced and why

Good landlord accounting software can help track these expenses throughout the year, making your Self Assessment tax return much simpler. Many landlords now use dedicated property management platforms that categorise expenses automatically and store digital receipts.

How This Affects Different Property Types

Fully Furnished Properties

If you previously claimed the Wear and Tear Allowance, you’ll need to track actual replacement costs now. In years with significant replacements, you may claim more than the old 10%. In quiet years, you’ll claim less or nothing.

Partly Furnished Properties

You’re now on equal footing with fully furnished landlords. Any domestic items you provide and later replace qualify for relief.

Unfurnished Properties

Even if you provide minimal items (perhaps just a cooker or carpets), you can claim replacement costs. Previously, you received no equivalent relief at all.

Holiday Lets and Furnished Holiday Lettings

The same rules apply. The old Wear and Tear Allowance was never available for holiday lets, but Replacement of Domestic Items Relief is available for all residential lettings.

Tax Planning Strategies Under the New System

Time your replacements strategically: If you’re approaching the higher-rate tax threshold (£50,270 for 2025/26), consider whether replacing items this year or next would be more tax-efficient.

Don’t delay necessary replacements: While you might be tempted to bunch replacements into a single tax year for maximum relief, remember that worn furnishings affect tenant satisfaction and rental income.

Consider capital allowances for furnished holiday lets: If you run a Furnished Holiday Lettings business (meeting specific criteria), you may be able to claim capital allowances on furniture and equipment, which can be more generous than replacement relief. This is a complex area requiring specialist advice.

Keep immaculate records: The better your documentation, the easier your tax return and the less likely HMRC will question your claims.

Review insurance coverage: Landlord insurance policies often cover accidental damage or tenant-caused damage to furnishings. When you claim on insurance, you can still claim tax relief on any excess you pay. Comparing landlord insurance providers annually can ensure you’re getting comprehensive cover at competitive rates.

Common Mistakes to Avoid

Claiming initial furnishing costs: Remember, you can only claim replacements, not the original purchase when you first let the property.

Forgetting to keep receipts: Without documentation, HMRC may disallow your claim entirely.

Claiming repairs as replacements: Repairs to existing items (reupholstering a sofa, fixing a washing machine) are claimed as repairs and maintenance expenses, not as replacement relief. They’re still deductible, but under a different category.

Claiming improvements: If you’re upgrading significantly beyond like-for-like replacement, you may need to apportion the cost.

Mixing up relief types: Don’t confuse this relief with capital allowances (which generally don’t apply to residential lets) or repairs and maintenance expenses (which cover fixing rather than replacing).

The Interaction with Other Tax Changes

The replacement of the Wear and Tear Allowance happened alongside other significant tax changes affecting landlords:

  • Mortgage interest restriction (Section 24): Since April 2020, you can no longer deduct mortgage interest from rental income. Instead, you receive a 20% tax credit. This has significantly increased tax bills for higher-rate taxpayers.

  • Capital Gains Tax rates: When you sell, residential property gains are taxed at 18% (basic rate) or 24% (higher rate) for 2025/26.

  • Reduced capital gains allowance: The annual CGT exemption is now just £3,000 (as of 2024/25 onwards).

These combined changes mean tax planning is more important than ever. While Replacement of Domestic Items Relief is relatively straightforward, it sits within a complex landscape of landlord taxation where professional advice can save thousands.

Key Takeaways

The Wear and Tear Allowance is gone, replaced by a fairer system that rewards actual expenditure:

  • Replacement of Domestic Items Relief allows you to claim the actual cost of replacing furnishings, appliances, and other moveable domestic items
  • All property types qualify: furnished, partly furnished, and unfurnished properties can all claim relief
  • Like-for-like replacements: You’re replacing worn or broken items with modern equivalents, not making improvements
  • Keep detailed records: Receipts, photographs, and documentation are essential to support your claims
  • Initial costs don’t qualify: You can only claim for replacements, not original furnishing costs
  • Plan strategically: Track your spending throughout the year and consider the timing of major replacements

In some years, you’ll claim more than the old 10% allowance; in others, you’ll claim less. Over the long term, the system should roughly balance out, while being fairer to all landlords regardless of how they furnish their properties.

If you’re unsure about what you can claim or how to categorise specific expenses, always consult a qualified accountant who specialises in property taxation. The rules are detailed, and getting them right can make a significant difference to your tax bill. With proper record-keeping and professional guidance, you can ensure you’re claiming every penny of relief you’re entitled to while staying fully compliant with HMRC requirements.