Over the past few years changes in tax legislation have adversely affected the Buy-to-Let market ranging from the 3% surcharge on second homes and Buy-to-Let properties to the reduction in tax allowance on interest payable on mortgages (which ceases altogether with effect as from 2020).
However, there do remain some tax allowances to help and assist in the cost of maintaining a residential investment property, the most common of which include replacing moveable furniture and renewing household appliances, kitchen-wear and carpets. However, any replacement must be like-for-like and in that context replacing a sofa with a sofa bed would not qualify for tax relief. Unfortunately, the old annual allowance of 10% for wear and tear is no longer available. Maintenance and repair are still allowable items which should encourage landlords to maintain their investments in order to achieve the best possible rent (return on capital).
Unfortunately, capital expenses such as the building of an extension are not allowable.
The sum total of all these changes have had the result of many owners of Buy-to-Let properties deciding to sell them reducing the stock of properties to let which has in turn generally helped to maintain rental levels, which in the short-term could increase. With the possibility of further tax changes to come in this sector the future may be uncertain for residential landlords.