Furnished Holiday Lets and the Spring 2024 Budget

Furnished Holiday Lets and the Spring 2024 Budget
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    Are furnished holiday lets a worthwhile investment after the spring 2024 budget?

    With the highs and lows of the recent Spring Budget fresh in our minds, many property investors and landlords across the UK are turning their attention to how the new fiscal plans will impact their investments.

    As of April 2025, the UK Government is set to eliminate the furnished holiday letting (FHL) tax regime. This means that FHL landlords, who are currently able to deduct their entire mortgage interest from rental income, will be taxed similarly to standard buy-to-let properties.

    AudTax are professional accountants and tax consultants based in London. We specialise in various sectors, including property finance, which is a popular field. We have a wealth of experience and expertise assisting landlords with their wealth and tax affairs, particularly when it comes to furnished holiday let investments.

    We understand the intricacies and challenges of investing in property, especially given the continuous changes to tax laws. That is why we provide a fast, responsive and quality landlord accounting service to help landlords like you get the support needed to make better investment decisions and optimise your income.

    Whether you’re a seasoned FHL landlord or hoping to begin your investment journey, this blog will help you decide whether continuing to invest is a sensible idea. Keep reading to learn more, or contact AudTax today to speak to a professional who can give you expertly tailored advice on your current situation.

    How will the Spring Budget 2024 affect furnished holiday landlords?

    While the spring 2024 budget brought many changes, one significant shift is towards landlords with furnished holiday lettings. The idea is to restore balance within the property market with the hope that more properties will become available for long-term rental.

    The budget touches on a few areas which have varying impacts on landlords and investors, specifically in the FHL sector.

    Abolishment of the furnished holiday lettings tax regime

    One of the top changes has been the abolishment of the furnished holiday letting regime. This change specifically affects landlords who own property in their own name, have a mortgage, and let it out for part of the year as an FHL.

    Where landlords could previously benefit from claiming mortgage interest payments against rental income and claim capital allowances on furniture, they can no longer do this. This means FHL landlords will be taxed the same way as standard residential properties, which pay tax on the rental profits according to the Income Tax bands ranging from 20% to 45%.

    The changes to the FHL tax regime will significantly affect many FHL owners. They will no longer benefit from the tax advantage of running a holiday let and will soon see their tax bills rise.

    Abolishment of multiple dwellings relief

    Alongside the abolishment of mortgage interest relief, investors who purchase multiple properties are also set to face a huge change.

    If you buy more than one residential property in a single transaction, you may currently benefit from the multiple dwellings relief (MDR), which reduces the stamp duty on multiple property purchases.

    For instance, if you purchase a block of two flats for £500,000 (£250,000 each), then MDR means you can split the cost and pay stamp duty at a lower price on the two separate properties rather than the overall transaction.

    With the plans to scrap the multiple dwellings relief, investors will soon be expected to pay higher upfront taxes, which could impact their investment plans and cash flow.

    While this change doesn’t directly impact FHL owners unless they purchase multiple dwellings with the intention of letting them out as holiday rentals, it may affect existing landlords who are looking to make further investments and widen their property portfolio.

    Changes to Capital Gains Tax

    The budget has brought about a significant adjustment to Capital Gains Tax (CGT), which impacts FHL owners, specifically those considering selling assets. While the higher CGT rates are set to reduce from 28% to 24%, there are more specific changes that you might want to consider.

    Currently, holiday lets can claim Business Asset Disposal Relief, meaning they pay a significantly lower CGT rate of 10% on the ‘gains’ made when selling qualifying assets. This is clearly more advantageous compared with the standard rate of 18% or a higher rate of 24%.

    However, this tax benefit will soon be abolished, meaning holiday let investors may end up paying higher property Capital Gains Tax regardless of the reduction.

    While the budget doesn’t directly mention the Business Asset Rollover Relief, which currently allows investors to defer Capital Gains Tax on specific business assets, it will certainly have an impact. You may be able to defer CGT payments to reinvest in new qualifying assets now, but when it comes to selling the new asset further down the line, you will be subject to paying more CGT due to the abolishment of the BADR.

    Should landlords continue to invest in furnished holiday lets?

    While the recent spring 2024 budget changes may feel daunting, it doesn’t necessarily mean all FHL landlords should abandon their investments. Holiday lets can still make a good investment in the UK, despite the update Jeremy Hunt has given.

    Firstly, ‘staycations’ have become increasingly popular in recent years. In 2023 alone, the number of Brits taking their summer holiday in the UK (also known as a staycation) rose by 50% compared to the previous year, according to Statista. So, with holiday homes in high demand, finding the right location for your FHL could see you benefitting regardless of the changes.

    Secondly, holiday lets typically give you the opportunity to receive higher income as you choose the nightly or weekly rate (which is usually relatively high compared to standard buy-to-let properties). They also have the added flexibility for you to use the property yourself throughout the year.

    It’s important to note that everyone’s situation is different, meaning that while holiday lets can be a viable investment for some, they may not always yield profits.

    If you’re simply basing your question on whether or not holiday lets make a good investment on the Spring Budget announcement, then you should think again. Consider all points, not just the current FHL rules. While these updates are crucial and can impact FHL owners, they are not the only factor that goes into profitability.

    Maximise your rental income with AudTax

    Speaking to our experienced accountants, who specialise in landlord accounting and FHL investments, will help you make the best decision moving forward. We can assess your current situation and analyse your income and outgoings to provide you with high-level insights. We’ll also provide ongoing support, identifying the best tax reliefs and benefits to help you make the most of your investments.

    Our role is to stay on top of industry changes and ever-evolving UK tax laws so we can help you act fast when new announcements are made. Our proactive team of accountants and tax professionals will keep you up-to-date and be on hand to answer any questions.

    Whether you’ve got a vast property portfolio consisting of various holiday lets or you’re contemplating FHLs as a profitable investment opportunity, we’re ready to assist. Contact us today, and let’s talk about your next steps in property investment.

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    Picture of Shahood Ahmed BSc, FMAAT, AFA MIPA

    Shahood Ahmed BSc, FMAAT, AFA MIPA

    Shahood is a fully qualified accountant, and holds UK memberships in numerous accounting bodies. Having worked in many accounting roles, he decided to set up his own practice to provide clients with the best accounting services, offering sound business advice.

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