The tax breaks for Furnished Holiday Lettings (FHL) are about to end.
Come April 2025, the rules change. Draft legislation is already in play. If you own a holiday property, it’s time to take note. The perks you’ve been enjoying are on the chopping block.
The advantages you’ve counted on will vanish, replaced by something less generous.
What you stand to lose
Currently, you can claim up to £1 million in capital expenditures under the Annual Investment Allowance (AIA).
If your FHL activities qualify as a business, you might get Business Asset Disposal Relief (BADR), which cuts down your Capital Gains Tax (CGT) bill.
Mortgage interest? You can fully deduct it from your rental income, which slices your taxable profit down to size.
The income you earn from FHLs is treated as earned income, so it’s eligible for relief at your highest Income Tax rate.
What’s changing?
When the FHL regime ends, these properties will be taxed like any other residential rental.
Here’s what that means:
What to do next
If you’re running FHL properties, the time to act is now. You’ve got until April 2025 to make the most of the current tax reliefs.
Haven’t claimed your capital allowances yet? Don’t wait. Secure those benefits while you still can.
Even if your FHL business is in the red, claiming allowances now could work in your favour.
It can increase the losses you carry forward, helping offset future profits.
You can also claim allowances for past expenditures as long as your FHL business is still up and running.
Thinking about selling? Doing it before the regime ends could let you take advantage of the 10 per cent Capital Gains Tax relief under BADR.
If you own a furnished holiday let and need to figure out your next move, contact us today.
