Furnished vs Unfurnished Lets — The Tax and Practical Reality

How wear and tear, replacement of domestic items relief, insurance and rent yields differ between furnished and unfurnished UK lets.

The old 10% wear-and-tear allowance disappeared in 2016. What replaced it — the Replacement of Domestic Items relief — is more precise, more restrictive, and often misunderstood.

What counts as furnished

There is no statutory definition. In practice: beds, sofas, tables, wardrobes, white goods and soft furnishings sufficient for the tenant to move in with only personal possessions. A property with just curtains and carpets is unfurnished.

Replacement of Domestic Items relief

You cannot deduct the cost of the first purchase of a domestic item — that is capital. You can deduct the replacement, on a like-for-like basis, net of any trade-in value, less any element of improvement.

Example: replacing a five-year-old £400 fridge-freezer with a £550 higher-spec unit. Deductible amount is £400 (the like-for-like), not £550. If you sold the old one for £30, deduct £370.

Items covered include beds, sofas, curtains, carpets, crockery, kitchen appliances not fixed to the property, televisions, cushions and dining sets. Fixtures — integrated ovens, boilers, fitted kitchens — remain capital and depreciate through capital allowances if the property qualifies (mostly commercial or FHL).

Furnished Holiday Lettings

An FHL sits in its own tax regime with capital allowances on furnishings and equipment, and profits count as relevant earnings for pension contributions. Note that from April 2025 the FHL regime is being aligned with normal property income — but existing rules on capital allowances for pre-April spend still matter.

Insurance and inventory

Furnished lets need higher contents cover — usually £15,000–£30,000 depending on spec. An inventory prepared by an independent clerk at the start of the tenancy is worth every penny of the £120–£200 fee: it is the deposit dispute evidence you cannot fabricate later.

Yield reality

Furnished lets typically achieve 5–15% higher headline rent. Against that:

Higher void turnover — furnished lets attract shorter-stay tenants.
Replacement cost cycle every 5–8 years on soft furnishings.
Insurance premium uplift.

Net-net, furnished is usually only worth it in true corporate-let or student markets. Standard family lets in most UK cities perform better unfurnished.

HMO exception

HMOs almost always need to be furnished to satisfy licence conditions and the practical realities of tenant demand. Build the replacement cycle into the operating budget from day one.

How EstateVera helps

Every property record tags its furnishing status and tracks depreciable inventory items with replacement dates. The tax export bundles Replacement of Domestic Items deductions into the correct SA105 line automatically.