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The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. The effect of abolishing the rules will be that FHL 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. This will apply to individuals, corporates and trusts who operate or sell FHL accommodation.
There are a number of implications from 2025/26 which are detailed below:
Pensions
Individuals will no longer be able to include this income within relevant UK earnings when calculating maximum pension relief.
Dwelling-related Loans
The amount of income tax relief landlords can receive on residential property finance costs is restricted to the basic rate of income tax of 20%.
Replacement of Domestic Items
Capital allowances will no longer be available for expenditure on new plant and machinery (subject to transitional rules) but instead businesses may claim relief on the replacement of certain items.
Capital Gains
The rules which allowed FHL to be treated as a trade for various capital gains tax reliefs are withdrawn in relation to disposals made on or after 6 April 2025 (1 April 2025 for Corporation Tax). Rollover relief on the replacement of business assets will no longer apply to acquisitions which take place on or after those dates. However, there are a number of detailed transitional rules to preserve certain reliefs such as Business Asset Disposal Relief in specific situations.
Losses
Broadly, any unused losses can be carried forward to set against future years’ profits of either the UK or overseas property business as appropriate
If you would like to discuss how this will impact you and your property, get in touch with a member of our team.