What does the abolishment of Furnished Holiday Lets mean for me?

What are the current FHL rules?

Furnished Holiday Lets (FHLs) currently qualify for favourable tax reliefs provided they meet certain criteria, such as being available for letting 210 days per year and let for at least 105 days per year.  Provided properties meets all FHL conditions, tax advantages include:

• Full tax relief for finance costs, such as interest and arrangement fees.
• Capital allowances can be claimed for assets used in your business.
• FHL profits are treated as net relevant earnings for pension purposes.
• Capital Gains Tax reliefs, such as Business Asset Disposal Relief.

So, what’s changing?

As announced in the Budget, from April 2025, the Furnished Holiday let regime is to be abolished, so FHLs will no longer benefit from the tax advantages listed above but will instead be taxed as a normal Buy to Let property.  This will mean:

• Interest and other finance costs will be restricted to 20% tax relief.
• Capital allowances can no longer be claimed.
• Profits will no longer be treated as net relevant earnings for pension purposes.
• Capitals Gains Tax liabilities on disposal or transfer will be higher.

Should I sell my FHL?

As with all tax changes, the impact on your cashflow and your future plans should be assessed, so that you can consider all options for the business going forwards. With the changes taking effect from April 2025, you may be able to restructure your FHL business, to be more tax efficient under the new rules, once in place.  If you were already considering selling your FHL, it may be beneficial to bring this forward, in order to benefit from the lower Capital Gain Tax rates in the 2024/25 tax year.

How can we help?

Perrys have a specialist property team who can help you fully understand the impact of the changes and guide you through the options available to mitigate any tax increases on your Furnished Holiday Let business.

Please contact us on 01732 882488 or use our online website enquiry, to arrange an initial meeting to discuss matters further.