Abolishment of Furnished holiday lettings tax regime confirmed

HM Revenue and Customs (HMRC) have released draft legislation and a policy paper detailing the proposal to abolish the furnished holiday lettings (FHL) tax regime. Initially announced by the previous government, any hopes that the new administration might halt this plan have been dispelled.

The new measures are set to take effect on or after 6 April 2025 for income and capital gains tax, and from 1 April 2025 for corporation tax.

The proposed revisions will remove the tax advantages that furnished holiday let landlords currently enjoy over other property businesses, as follows:

1. Loan interest will be restricted to the basic rate for Income Tax.
2. Capital allowance rules for new expenditures will be removed and replaced with the replacement of domestic items relief available to other property businesses.
3. Capital gains tax reliefs based on disposing of a business asset will no longer apply to furnished holiday lets.
4. Furnished holiday let income will no longer be included within relevant UK earnings when calculating maximum pension relief.

There are specific transitional rules that will apply to these changes.

If you own properties that currently qualify for the FHL tax regime, we recommend that you review the impacts of this legislative change to determine if you need to take any action. GET IN TOUCH WITH OUR WIMBLEDON ACCOUNTANTS to discuss how these changes may affect you and to get tailored advice.

For further assistance and to understand how these changes might impact you, please do not hesitate to contact us. We would be pleased to help you.

See: Government Publication on FHL Tax Regime Abolition