Furnished Holiday Lettings tax regime to be abolished from 6 April 2025!
HMRC have now published draft legislation detailing how the abolition of the Furnished Holiday Letting (FHL) rules in April 2025 will operate.
It was announced at the 2024 Spring Budget that the Furnished Holiday Letting (FHL) regime would be abolished from:
6 April 2025 for Income Tax and Capital Gains Tax (CGT) purposes.
1 April 2025 for Corporation Tax purposes.
This change will remove the tax advantages that current furnished holiday let landlords have received over other property businesses in 4 key areas by:
applying the finance cost restriction rules so that loan interest will be restricted to basic rate for Income Tax
removing capital allowances rules for new expenditure and allowing replacement of domestic items relief
withdrawing access to reliefs from taxes on chargeable gains for trading business assets
no longer including this income within relevant UK earnings when calculating maximum pension relief
The Impact on Capital Allowances
The extended availability of capital allowances to FHL businesses will cease from 1st April 2025 for corporation tax purposes and the 6th April 2025 for income tax purposes.
A major point that has been clarified is that it will not be necessary to bring a disposal value into account when the FHL regime is abolished. Where a former FHL business has an ongoing capital allowances pool, it can continue to claim Writing Down Allowances on that pool after 6 April 2025.
On 6 April 2025, former FHL properties will become part of a taxpayer's UK or overseas property business, as appropriate. Where losses are carried forward from a former FHL business as of 5 April 2025, those losses will be available for offset against future years’ profits.
Summary
Although this is not the news FHL owners and tourism boards across the country wanted (yet fully expected) there is still time to to make use of the capital allowances embedded in the purchase, refurbishment or build of your holiday let. The latest point to submit your claim is the 24/25 tax year, and any remaining capital allowances pools can be carried forward in to future years with no need to bring a disposal value into account, which is good news.
Read the full policy paper here:
If you require assistance with your holiday let claim before this window closes for good, you can contact us on 0843 005 9711 or by using our contact form here: https://www.jamesnazir.com/doiqualify
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