Despite strong lobbying since the Spring Budget, the abolition of the FHL tax regime will go ahead as planned from April 2025 following policy papers published on the 29th of July.
This comes as a major blow to many FHL owners who see beneficial tax treatments and advantages lost, when the industry is already reeling in some parts of the UK with various determining factors to their business that sit outside of their control.
New changes will remove the tax advantages that current furnished holiday let landlords have received over other property businesses in four key areas by:
- Applying the finance cost restriction rules so that loan interest will be restricted to basic rate for Income Tax.
- Removing capital allowances rules for new expenditure and allowing replacement of domestic items relief.
- Withdrawing access to reliefs from taxes on chargeable gains for trading business assets.
- No longer including this income within relevant UK earnings when calculating maximum pension relief.
As we know the changes will come into effect from 1st April 2025 for property company owned and 6th April 2025 for individuals.
Offering some room for optimism, was the Transitional Rules relating to Capital Allowances which are still favourable to FHL owners.
Quite simply, as it stands, if a capital allowances claim is made before April 2025, then any unused pools or losses can continue to be claimed beyond that date and utilised as means as reducing their FHL profits until the pool is exhausted. This will potentially generate savings for many years beyond April 2025 for owners.
There were fears that this benefit would come to an end, but after April 2025, former furnished holiday let properties will form part of the person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses.
If you own an FHL, now is the time to seek advice on claiming your capital allowances before it is too late. Owners have until April 2025 to claim their allowances, or this valuable benefit will be lost forever.
More information can be found on the Gov.uk website.