< Back to Latest News Studies Article: FHL Tax Regime Abolition Confirmed – HMRC Publish Draft Legislation

The new rules will have the following key implications for FHL owners:

Relief for finance costs on FHLs (interest on loans & mortgages) restricted to basic rate (20%) tax deduction only. 

Capital allowances will no longer be available.

Capital Gains Tax reliefs will be removed.

FHL income no longer classed as relevant earnings when calculating pension tax relief.

It is proposed that the new legislation will take affect from April 2025 (Tax year 2025/26). 

Further Information . . .

Transitional rules have been announced that are favourable to FHL owners. Any unused capital allowances pools or losses remaining when the FHL regime ends, can continue to be claimed.

This is a silver lining for holiday let owners. It was feared that unclaimed tax relief would be lost when the FHL regime ceased.  Not only can FHL owners still use the remaining tax relief, they will also be able to offset it against rental income from residential or commercial properties!

The new legislation and transitional rules will also apply to FHL’s owned in a limited company. 

We understand there will be a consultation process until 15 September 2024, where HMRC will invite comments on the proposed legislation. It is unclear whether this will lead to any major amendments.

Holiday let owners who are concerned about the tax implications of these proposed new rules can arrange a free tax consultation with one of our holiday let tax experts.

Zeal encourage all FHL owners to review their capital allowances to ensure no claim has been missed before the tax regime ends.

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Zeal Tax are currently reviewing the full legislative changes and will provide a comprehensive summary over the coming days, including options to minimise any impact on your holiday let business.

Disclaimer by Zeal 

This article was written by Matt Jeffery of Zeal Tax, a leading capital allowances specialist firm in the UK, as an educational piece to help business owners understand recent changes to Furnished Holiday Let Taxation. Matt can be contacted either by calling 01633 287898 or by email on hello@gozeal.co.uk.

The information provided in this article is of a general nature. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific advice from a professional before you take any action or refrain from action. Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We and our associates disclaim all warranties.