Furnished Holiday Lettings regime to be abolished
If you run a holiday let, then you are probably well aware of the useful tax advantages that holiday lets have had for many years. Because furnished holiday lets can be treated as a trade rather than as a rental property, there are more generous deductions against income available. Also, there has been a significant advantage in property capital gains tax when selling a furnished holiday let.
During the Spring Budget, the Chancellor Jeremy Hunt announced that the Furnished Holiday Lettings regime is to be abolished with effect from 6 April 2025.
This means that your holiday let profits will need to be calculated and taxed based on the same tax laws as other rental property profits. Unfortunately, that will mean that if your holiday let income remains the same you are likely to see an increase in the amount of tax payable.
Particularly disappointing is that if you sell your holiday let after 6 April 2025, Business Asset Disposal Relief, with its potentially low 10% capital gains tax rate, will not be available.
While there is another year yet before the abolition happens, there will be measures in place from 6 March 2024 (the day of the Budget announcement) to prevent tax planning steps that may try to manipulate the sale date of a holiday let so that it appears to occur before 6 April 2025.
Detailed legislation covering the change has not been released yet, but if you are thinking about selling your holiday let it may be worth giving some early thought to the timing of the sale so that you do not pay more tax than necessary. Of course, as with all tax planning, you should also consider your overall tax situation, any potential downsides, and your personal priorities.