Removal Of Furnished Holiday Letting Rules
Chrissy Leach • 24 September 2024
There are big tax changes coming for owners of holiday lets as the Furnished Holiday Lettings (FHL) regime will be removed
From April 2025, holiday lettings will be treated as normal residential properties and taxed like them which means the tax benefits will be lost.
Mortgage Interest Relief
Mortgage interest is an allowable expense when calculating rental profits for an FHL but this will be removed from April 2025. If your holiday let has a mortgage and you’re a higher/additional rate taxpayer then you’re likely to pay more tax.
Expenses
Capital allowances can be claimed for FHL’s which is tax relief for fixtures and fittings but this is not available for usual residential properties.
Capital Gains
The sale of an FHL property would potentially qualify for Business Asset Disposal Relief which means capital gains tax (CGT) could be as low as 10%. From April 2025 the usual CGT rates for residential property will apply. At the time of writing that’s 18% at the basic rate and 24% at the higher rate. There is speculation that these rates may be increased at the Autumn Budget.
Pension Contributions
Pension contributions can be made up to your relevant UK earnings (or £3,600 if earnings are lower). FHL profits count as relevant UK earnings so this means you are able to save more into your pension and get tax relief but this will be lost from April 2025.
If you’re looking for advice on how this affects you then contact us.
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