Abolition of Furnished Holiday Lettings

Furnished Holiday Lettings

Perhaps the most attention-grabbing headline from Spring Budget was the news that the concept of Furnished Holiday Lettings (FHLs) will be abolished from 6 April 2025. This is not good news for those who currently operate FHLs because it means that considerable tax benefits unique to FHL businesses will no longer be available.

Currently, the following tax advantages are available to FHLs:

• Interest incurred on borrowings is fully deductible against taxable profits;
• Beneficial capital allowances rules allowing tax relief for fixtures;
• Various capital gains tax reliefs, including the potential for business asset disposal relief (10% rate on the gain), rollover relief and gifts hold-over relief
• Profits from FHLs can be treated as relevant earnings for pension purposes; and
• Income from a FHL held jointly by a married couple or civil partners is not caught by the default 50:50 split for income tax purposes.

At the time of writing, the details of the abolition are unclear because we are waiting for draft legislation to be published. It has, however, been announced that the legislation will include ‘anti-forestalling’ measures that will prevent obtaining a tax advantage by using unconditional contracts to secure the CGT reliefs for FHLs before the regime is abolished.

If you own an FHL, there will be considerable tax implications, so planning will be key. Once we are party to the draft legislation we will be able to assist you with your planning.