As announced earlier this summer, the Finance Bill 2024-25 will confirm that the Furnished Holiday Let (FHL) tax regime will be abolished. Starting in April 2025, income and gains from FHLs will be treated as part of a person’s regular UK or overseas property business.
Historically, FHLs enjoyed more favorable tax treatment compared to other types of rental properties. This included full relief for interest costs, the ability to claim capital allowances, and eligibility for Business Asset Disposal Relief (BADR). To qualify for the FHL regime, property owners had to meet specific criteria, such as minimum occupancy periods each year and restrictions on how long a single tenant could stay.
From 2025-26, FHLs will be taxed in the same way as any other rental property.
Tax Planning Opportunities
If you own an FHL business, you may want to consider some general tax planning strategies before the changes take effect on 5 April 2025. Here are a few options to think about:
- Ceasing or Adjusting Your Business: You might explore adjusting your business structure or ceasing the FHL business before the deadline. This could potentially open up opportunities for tax reliefs or benefits
- Selling and Reinvesting: Another option is to consider selling the property and reinvesting the proceeds into another qualifying asset, which could allow you to defer any potential tax liabilities
What next?
If you have any questions about anything covered in this article, get in touch with one of our experts here at Gravita.
