PIM3205 - Furnished lettings: Overview
Source: gov.uk (2025-03-17)


This guidance applies to furnished residential lettings.

This guidance does not apply to qualifying furnished holiday lettings. For guidance on furnished holiday lettings see PIM4100 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4100) onwards.

This guidance does not apply to cases falling within the rent a room scheme. For guidance on rent a room see PIM4000 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4000) onwards.

The furnished holiday lettings rules cease to apply in tax years commencing on or after 6 April 2025 for Income Tax and for Capital Gains Tax, and 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.

Background

Historically the income from providing furniture was not treated for tax purposes as income from exploiting an interest in land. The legislation now includes as part of a property business the income and expenditure from furniture included in a lease of a building (both residential and commercial). It also applies to the provision of furniture as part of a lease of a caravan or the lease of a houseboat, where these form part of a property business.

The following sections look at relief for expenditure incurred on the provision of plant or machinery, including furniture, for use in a residential property. These are referred to in the guidance as “dwelling house”. These items do not qualify for capital allowances (see CA23060 (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23060)), but a deduction may be available for replacement of domestic items (for periods beginning on or after 6 April 2016). These sections apply to both a UK property business and an overseas property business.

Relief is also available for expenditure on repairs. Guidance on these issues can be found in the Business Income Manual at BIM46900 (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46900).

Guidance

The deductions allowable for certain expenditure incurred in providing furnished lettings has changed several times in the past few years and care should be taken that the appropriate treatment is applied depending on the timing of the expenditure incurred. A summary of the different treatments is set out below along with the relevant timings (starting with the current treatment first).

Replacement of Domestic Items Relief: ITTOIA/S311A, CTA09/S250A

This legislation applies to expenditure incurred on or after 6 April 2016 for income tax purposes and 1 April 2016 for corporation tax payers.

Broadly, it allows a deduction for the replacement (not initial purchase) of certain domestic items such as furniture, furnishings, household appliances and kitchenware.

Wear and tear allowance: ITTOIA/S308A, CTA09/S248A

This legislation applies to tax years 2011-12 to 2015-16 for income tax payers and for accounting periods commencing on or after 1 April 2011 until 31 March 2016 for corporation tax payers. Note that for CT there are transitional arrangements for accounting periods which begin before 1 April 2016 and end on or after that date (a straddling period).

Taxpayers could elect to deduct a wear and tear allowance as an expense of their property business. Instead of claiming relief for replacing utensils, or repairing furniture, the taxpayers deduct an allowance.

Wear and Tear Allowance: ESC B47

Under this extra-statutory concession wear and tear allowance was available for tax years 2010-11 and earlier for income tax payers and accounting periods beginning before 1 April 2011 for corporation tax payers.

Taxpayers could elect to deduct a wear and tear allowance as an expense of their property business. Instead of claiming relief for replacing utensils, or repairing furniture, the taxpayers deduct an allowance.

Taxpayers needed to choose whether they were claiming Renewals Basis or Wear and Tear Allowance under ESC B47 and this would need to be consistent year to year.

Renewals Basis: ESC B47

Under this extra-statutory concession this renewals basis was available for expenditure incurred before 6 April 2013 for income tax purposes and before 1 April 2013 for corporation tax purposes.

This allowed the cost of replacing plant and machinery supplied with the property to be claimed as an expense where neither the 10% wear and tear allowance nor plant and machinery capital allowances are claimed. The renewals allowance was also available for unfurnished property.

Taxpayers needed to choose whether they were claiming Renewals Basis or Wear and Tear Allowance under ESC B47 and this would need to be consistent year to year.