The abolition of the furnished holiday lettings (FHL) tax regime starts soon

The new measures are proposed to take effect on or after 6 April 2025 for income and capital gains tax, and from 1 April 2025 for corporation tax.

The proposed revisions will remove the tax advantages that furnished holiday let landlords have over other property businesses, as follows:

1. Loan interest will be restricted to the basic rate for Income Tax.
2. Capital allowance rules for new expenditure will be removed and replaced with the replacement of domestic items relief available to other property businesses. Unclaimed balances will be able to be carried forward.
3. Capital gains tax reliefs based on disposing a business asset will no longer apply to furnished holiday lets.
4. Furnished holiday let income will no longer be included within relevant UK earnings when calculating maximum pension relief.

Losses will be able to be carried forward post April 2025.

There are some specific transitional rules that will apply to these changes.

If you own properties that currently qualify for the FHL tax regime, we recommend that you review the effects that the change in legislation will have on you so that you can determine if you need to take any action. If you need any help with this, please do not hesitate to contact us, we would be pleased to help you.