HM Revenue and Customs (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 any hopes that this may be stalled by the new government are now laid to rest.
The new measures are proposed 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 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.
More information explaining the abolishment of the furnished holiday lettings tax regime can be found on Gov.uk website.
Disclaimer: The information in this article is provided for general information only and does not constitute legal or professional advice. We cannot accept responsibility or liability for any actions you may take, or not take, based on this information.
