From April 2025, the rules that furnished holiday lets can benefit from will be abolished.
It is estimated that these changes will raise HMRC £35m in extra tax in he tax year 2025-2026 and much more in the following years.
What is a furnished holiday let property?
To qualify as a furnished holiday let, a property:
- Must be available for short-term letting to the public for 210 days each tax year
- It must be actually let for a minimum of 105 days each tax year
- It cannot be let to the same person for more than 31 days in a period.
What is changing?
- Interest on loans and finance will no longer be tax deductible against rental income. You will be entitled to the normal tax relief of 20% on the interest on the loans after tax has been calculated on the profits before interest is deducted.
- Capital allowances will not be permitted. Instead, you are permitted to claim costs of replacement of domestic items relief.
- When selling the property, the gain is treated as a capital gain on a residential property and not a business asset.
- The profit made from the rental of the property, is no longer included in calculating the UK relevant earnings when calculating maximum pension relief.
What happens to losses carried forward?
Losses brought forward can be offset in future years against profits of rental properties in the UK and overseas.
How can I prepare for the change?
Be aware of the additional tax you may need to pay through these changes both on renting the property and the eventual sale of the property.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the contact us page on our website: www.champconsultants.co.uk
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