At the Spring Budget, Chancellor Jeremy Hunt announced that the Furnished Holiday Lettings regime is to be abolished from 6 April 2025.
There are useful tax advantages for holiday lets, as furnished holiday lets can be treated as a trade rather than as a rental property, with more generous deductions against income available. There is also a significant advantage in property capital gains tax when selling a furnished holiday let.
The new rules from April 6 2025 will mean 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, measures are already in place 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 perhaps give some early thought to the timing of the sale so that you do not pay more tax than necessary. As with all tax planning, you should also consider your overall tax situation, any potential downsides, and your personal priorities.
We can prepare a personalised analysis of how the withdrawal of the furnished holiday letting regime will affect you. Please contact us at info@thomsoncooper.com.