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Act now to beat property let tax rule changes


The tax-advantageous regime for furnished holiday lets (FHLs) is being abolished from April 2025 writes Tim Woodgates, partner at chartered accountants Moore.  The Chancellor is hoping that this change will encourage landlords to favour longer-term lettings over short-term vacation rentals.

This means property owners offering AirBnB-style short lets have limited time remaining to take advantage of valuable FHL relief before the rules change.

Tim Woodgates.

What qualifies as a Furnished Holiday Let?

  • The property is available for commercial letting as holiday accommodation for at least 210 days in and actually let for at least 105 days in the tax year.
  • Lets longer than 31 days do not count as holiday lets.
  • For lettings that don’t quite meet the conditions, it is possible to elect to average lettings between more than one property or to apply a period of grace to treat the conditions as met in a slow year.

What are the tax advantages of the Furnished Holiday Let regime?

Where a let qualifies, the tax advantages can be significant:

  • Full deduction against income for interest on borrowings.
  • Reliefs from capital gains tax including business asset disposal relief (10% tax rate on sale), rollover relief and gift hold-over relief to defer gains.
  • Profits treated as earnings for pension contribution purposes.
  • Beneficial capital allowances rules for tax relief on fixtures.

Property owners have a short window of opportunity to take advantage of the tax benefits available for qualifying rentals.

For example, reviewing possible claims for capital allowances to find missed reliefs can reduce FHL taxable profits.  Allowances are available for furniture, white goods and property fixtures; unlike standard buy-to-let properties, a deduction is available for initial expenditure and not only replacements and repairs.

There is no time limit for claiming capital allowances where the asset is still used in the FHL business, but the opportunity to claim will be withdrawn from April 2025.

This advice insight is indicative only and full tax advice should be sought on your specific circumstances.

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