The details of the new measure affecting the profits of a property business will come into force for expenditure incurred on or after 1 April 2016 for corporation tax payers and 6 April 2016 for income tax payers.

The amount of the deduction is:

• the cost of the new replacement item, limited to the cost of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent) plus
• the incidental costs of disposing of the old item or acquiring the replacement less
• any amounts received on disposal of the old item
• This deduction will not be available for furnished holiday lettings because capital allowances will continue to be available for them.

The deduction will be available in calculating the profits of a property business which includes a dwelling-house. The deduction is available for expenditure on furniture, furnishings, appliances (including white goods) and kitchenware, where the expenditure is on a replacement item provided for use in the dwelling.

It will be for the cost of a like-for-like, or nearest modern equivalent, replacement asset, plus any costs incurred in disposing of, or less any proceeds received for, the asset being replaced.

The measure will be enacted in Finance Bill 2016. The change was first announced at Summer Budget 2015 in July.

The move comes as the government introduces a raft of tax changes affecting buy-to-let owners including the staggered removal of higher rate tax relief of mortgage interest by 2019 and the introduction of a 3% stamp duty land tax (SDLT) levy for owners of buy-to-let properties and second homes, due to come into force from April 2016.

More information on reform of the wear and tear allowance is available here

What you need to know: Finance Bill 2016

To find out more about changes announced in the Autumn Statement 2015 and Finance Bill 2016 draft proposals, click here