--- title: Summer budget. Residential properties; what landlords should know description: In the summer budget there were two announcements affecting the tax relief available to individual landlords. image: https://blog.shorts.uk.com/hubfs/Imported_Blog_Media/DSC_0094.jpg --- [![Shorts_logo_White](https://blog.shorts.uk.com/hubfs/New%20Site%202018/Shorts_logo_White.svg "Shorts_logo_White")](https://www.shorts.uk.com/) [Blogs & News](https://blog.shorts.uk.com/) > [Land & Property](https://blog.shorts.uk.com/topic/land-property) # Summer budget. Residential properties; what landlords should know Dawn Sharman - 20 July 2015 ###### Select topic - Please Select - [ Audit ](https://blog.shorts.uk.com/topic/audit) [ Business Taxes ](https://blog.shorts.uk.com/topic/business-taxes) [ Radius – R&D Tax Relief & Patent Box ](https://blog.shorts.uk.com/topic/radius-rd-tax-relief-patent-box) [ Corporate Finance ](https://blog.shorts.uk.com/topic/corporate-finance) [ GENUS Management Accounts ](https://blog.shorts.uk.com/topic/genus-management-accounts) [ VAT ](https://blog.shorts.uk.com/topic/vat) [ Private Client ](https://blog.shorts.uk.com/topic/private-client) [ Payroll ](https://blog.shorts.uk.com/topic/payroll) [ EOT ](https://blog.shorts.uk.com/topic/eot) [ International Taxes ](https://blog.shorts.uk.com/topic/international-taxes) ![featured image](https://blog.shorts.uk.com/hubfs/Imported_Blog_Media/DSC_0094.jpg) In the summer budget there were two announcements affecting the tax relief available to individual landlords who let out residential properties expected to take effect from next April. **Wear and Tear Allowance** This allowance is currently an option for landlords who let out a furnished residential property. Essentially the landlord may elect to claim tax relief on 10% of net rents as an expense each year instead of the actual costs incurred on replacing utensils or repairing furniture. There will now be a consultation to replace this allowance with a new relief from April 2016 that allows all residential landlords to deduct the actual costs of replacing furnishings. For landlords who currently claim the Wear and Tear Allowance they could see fluctuations in their taxable profits as these will be dependent on actual expenditure in the future. There may be action to take and we will advise further when full details of the new relief are known. However, we would suggest you contact your adviser before incurring any significant expenditure. **Restricting finance cost relief ** This will affect higher and additional tax payers with residential lettings, unless they are furnished holiday lets, who claim mortgage interest payments against rental income. Legislation has been drafted to be phased in from 6 April 2017 to reduce the higher rate tax relief available over a four year period. Currently finance costs are deducted directly from the rents giving the taxpayer tax relief at their highest rate. Under the new rules the finance costs will not be deducted in this way. Instead the tax relief will be gradually reduced over the next five years to just 20% by reducing the individuals overall tax liability. It is not yet clear what will happen where mortgage interest currently creates a loss that will be used against future rental profits. **Illustration for a higher rate taxpayer (40%) with finance costs of say £3,000 each year** Tax                               Existing tax                   Maximum tax relief Year                             relief at 40%                  under new rules 2016/17                         £1,200                          £1,200 2017/18                         £1,200                          £1,050 2018/19                         £1,200                             £900 2019/20                         £1,200                             £750 2020/21                         £1,200                             £600 As can be seen, for landlords who are higher rate taxpayers, the tax burden will increase over time. However, there are ways of mitigating this and you may wish to [contact us](https://www.shorts.uk.com/contact-us/) to discuss your options. ![author](https://blog.shorts.uk.com/hubfs/Dawn%20Sharman%20round%20circle.jpg) #### Dawn Sharman I am part of the Private Client Team at Shorts, and have over 25 years of experience in accountancy. My background includes managing a portfolio of clients handling personal and corporate taxes, including estate planning during lifetime and death. My other specialism is working with clients in the medical profession. [View my articles](https://blog.shorts.uk.com/author/dawn-sharman) Tags: [Land & Property](https://blog.shorts.uk.com/topic/land-property), [Business Taxes](https://blog.shorts.uk.com/topic/business-taxes) Share this on - - - [Questions? 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