Warning issued to Shropshire holiday home owners

The Chancellor has announced plans to reduce the tax benefits for people who rent out their holiday homes to boost their income.

Natalie Bate, from Dyke Yaxley Chartered Accountants in Shrewsbury, said: “Draft legislation has been drawn up that will abolish the furnished holiday lettings (FHL) tax regime from April next year.

“This means that any landlord who offers short-term holiday lets will see their tax advantages disappear, and the income and gains they receive will be part of their UK or overseas property business. They will also be treated in exactly the same way as any other property income and gains.”

Natalie said the income tax and capital gains tax rules would be introduced from April 6, 2025, and the changes to corporation tax and chargeable gains from April 1.

“To qualify as a holiday let, properties must be available for short-term letting for 210 days and actually let for 105 days or more in each tax year. They should also not be used as a long-term let of over 31 days at a time.”

As the new plans are applied, there will be some transitional rules covering capital allowances treatment, with a short-term allowance for existing furnished holiday lets spending on an ongoing project.

“Any new expenditure spent on or after the dates concerned though must be considered under the property business rules,” said Natalie.

“Under the existing rules, furnished holiday lets are eligible for roll-over relief, business asset disposal relief, gift relief, relief for loans to traders, and exemptions for disposals by companies with substantial shareholdings.

“But all of these reliefs will be abolished with the new rules and it’s vital that property owners are aware of the changes they will face in the coming months.”

HM Revenue and Customs are facing an estimated bill of around £6 million to make the changes required to their IT systems to facilitate the new rules, and there will be a small increase in staff to support the transitional process.