< Back to Latest News Studies Article: Furnished Holiday Let Tax Update [June 2024]

Author: Matthew Jeffery, Tax Director

Zeal have been working closely with key stakeholders in the industry to support the lobbying efforts with Treasury Ministers within Parliament. 

Below sets out a summary of the latest position and everything else you need to know.

What are the changes?

To quickly recap, if the FHL regime is abolished, we would expect the following key tax implications:

Restriction on tax deductions for finance costs.

Ability to claim capital allowances removed.

Capital Gain Tax (CGT) reliefs withdrawn.

Joint owners will have to share profits equally.

No longer able to make pension contributions.

All the above are likely to result in FHL owners paying more tax!

Who will be the most affected?

Owners who have mortgages and taxable income from other sources are likely to pay an extra 20p in tax for every £1 of interest deductions. This will have a big impact on the return on investment for many owners.

New holiday let owners will no longer be able to claim capital allowances on the costs incurred to purchase, refurbish and fit-out their properties. This would have a major impact on future tax liabilities for owners entering the industry after changes to the rules.

What action has been taken to prevent the changes?

Led by The Professional Association of Self-Caterers (PASC) and supported by key stakeholders in the industry, such as Sykes Holiday Cottages, PASC has been lobbying the Government to rethink their plans to abolish the FHL tax regime.  This included a petition that reached the necessary 10,000 signatures within record time! The lobbying has been a data led approach, including statistics on FHL’s contribution to local economies, the impact of empty homes, the under provision of new home building targets etc.   

It has not only been PASC that has been putting the pressure on the Government.  We understand that over 15,000 letters have been received by MP’s from their constituents!  The responses from MP’s have been varied.  Some supporting the Governments objectives and others sympathising and suggesting they will support the battle to stop the new rules coming into force.

Has it had any Impact?

In short, yes! The petition and lobbying by PASC has resulted in meetings with The Chancellor and Treasury Ministers.  It also secured a parliamentary debate on 1^st May 2024, where many MP’s spoke favourably in support of FHL owners.  There was also a sense that those MP’s who were strongly for the new rules, were backtracking and suggesting a detailed consultation was needed before any changes were implemented.  We suspect few of them were aware that the Office for Tax Simplification (OTS) completed a consultation on the FHL regime in 2022!  

Will it Definitely Happen?

At this stage, it is unclear. It is important to note that budget announcements are not law. They are an intention to create law/legislation. We do know that the process to write new legislation is not as simple as the Government expected. We have seen letters from MP’s to their constituents that confirm this and suggesting that the plans may be scrapped altogether!

What we do know is that the new tax legislation to abolish the FHL tax regime is not within the draft Finance Bill for 2024 (which is enacted from April 2025). This Bill was given Royal Assent on 24 May 2024. Royal Assent is the final stage of a bill’s passage through Parliament. At that point, the bill becomes law. On this basis, the earliest it will become law, will be April 2026.

What impact will the General Election have?

Since the Spring Budget, a general election has been called for 4^th July 2024.  It is fair to say, the election will have an impact on the timing of the new rules as Parliament is in recess until after the election.

Should the conservative party remain in Government, we would expect them to push forward with their plans to scrap the FHL regime, but they have indicated that they will hold a consultation on the draft legislation.  This suggests that there may be some concessions or perhaps a back track all together.   It wouldn’t be the first time the Government have changed their mind!

Discussion have also been held with Labour treasury policy officials.  It is understood that Labour are open to discussions, but don’t see the FHL tax regime as a priority, if/when they get into Government.

What should you do now?

If you are a holiday let owner that is worried about the impact of the new rules, we would recommend speaking to a tax advisor as soon as possible to discuss your options.  Transferring properties to a Limited company before the rules change, is an effective solution for owners that have mortgages and pay tax at the higher rates.

We would also encourage all holiday let owners that started letting before April 2023 to review and identify any unclaimed capital allowances as soon as possible. 

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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.