HM Revenue and Customs (HMRC) have released draft legislation and a policy paper detailing the proposed abolition of the furnished holiday lettings (FHL) tax regime. Originally announced by the previous government, any hopes that this might be delayed under the new administration have now been dispelled.

The new measures are set to take effect from 6 April 2025 for income and capital gains tax, and from 1 April 2025 for corporation tax. These changes will eliminate the tax advantages that furnished holiday let landlords currently enjoy over other property businesses, as outlined below:

  1. Loan interest will be limited to the basic rate for Income Tax.
  2. Capital allowance rules for new expenditure will be removed, replaced by the domestic items relief available to other property businesses.
  3. Capital gains tax reliefs related to disposing of a business asset will no longer apply to furnished holiday lets.
  4. Furnished holiday let income will no longer be considered relevant UK earnings when calculating maximum pension relief.

Specific transitional rules will apply to these changes.

If you own properties that currently qualify under the FHL tax regime, it is advisable to review how these legislative changes may impact you, so you can determine if any action is necessary. If you need assistance, please don’t hesitate to contact us—we’d be happy to help.

See: https://www.gov.uk/government/publications/furnished-holiday-lettings-tax-regime-abolition