Abolition confirmed for Furnished Holiday Lettings tax regime
HMRC have published draft legislation and a policy paper outlining the proposal for the abolition of the furnished holiday lettings (FHL) tax regime. This was originally announced by the previous government and the announcement clarifies the new government’s stance on the subject.
What will happen and when?
The new measures are proposed to take effect on or after the 6th April 2025 for income and capital gains tax, and from the 1st April 2025 for corporation tax.
The proposed revisions will remove the tax advantages that furnished holiday let landlords have over other property businesses, as follows:
- Loan interest will be restricted to the basic rate for Income Tax.
- Capital allowance rules for new expenditure will be removed and replaced with the replacement of domestic items relief available to other property businesses.
- Capital gains tax reliefs based on disposing a business asset will no longer apply to furnished holiday lets.
- Furnished holiday let income will no longer be included within relevant UK earnings when calculating maximum pension relief.
There are some specific transitional rules that will apply to these changes.
What to do now…
If you own properties that currently qualify for the Furnished Holiday Let tax regime, we’d recommend you review the effects that the change in legislation will have on your affairs. From there you can decide what action to take.
As always, if you need any help with the fact finding or decision making process, please get in touch; we’re here to help!
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