6 March 2024
If you are covering the changes to Furnished Holiday Letting tax relief, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
"In a move that might be deeply unpopular amongst some core Tory voters Chancellor Jeremy Hunt has abolished the preferential tax regime for Furnished Holiday Lets (FHL). By aligning the tax treatment of holiday lets with that of other rental properties, the government might be able to raise a reported additional £300 million a year. This move could be seen as an effort to level the playing field between holiday let owners and private rental landlords, who have not been eligible for the same tax reliefs. But it will have some significant ramifications which may be both good and bad.
"Our calculations show that this could lose an average of £2,835 a year in a tax. The calculations are based on a property purchase price of £350,000, with an annual mortgage rate of 4.5pc and £20,000 rental income.
"For owners of holiday lets this could lead to a significant reduction in their net income. Should they lose the ability to deduct mortgage interest in full (in favour of a 20% deduction), alongside the potential increase in capital gains tax, this could make the holiday let business less financially attractive. This might result in a reduction in the number of properties available for holiday lets, which could impact local tourism.
"However, on the other hand for locals living in areas with a high concentration of holiday lets this could help them afford properties in their home towns which have gradually been pushed further and further out of reach by skyrocketing house prices out of kilter with the general house prices in the region or salaries for the area.
"By potentially reducing the number of holiday lets and addressing the imbalance between holiday homes and permanent residences, there could be positive effects on local housing availability and community cohesion."
For more information, please contact Alex Berry on + 44 (0)7741151931
