It was announced at Jeremy Hunt’s final budget as Chancellor that the Furnished Holiday Let (FHL) regime was intended to be abolished with effect from April 2025. Apart from a vague warning about anti-forestalling using unconditional contracts, almost no detail was provided.
Despite a change of government since the announcement was made, on 29 July 2024 the new Chancellor Rachel Reeves confirmed this abolition will take place and provided a little further detail.
The operative date will still be April 2025 and the detail, in the form of draft legislation, has not yet been produced so there are still areas of uncertainty, but the changes appear to be as follows:
- From April 2025 any borrowings associated with an FHL will only generate basic rate tax relief, in line with other UK residential lettings
- From April 2025 it will not be possible to claim capital allowances in relation to the FHL business, but existing capital allowance pools can continue to be written down and there will be no balancing charge / exit cost
- From April 2025 losses (pre-existing or newly incurred) will be treated as if they were ‘normal’ letting losses rather than FHL business losses
- From April 2025 capital gains tax advantages will cease to apply. However it appears that where an FHL business is ceased prior to April 2025 there may be circumstances in which Business Asset Disposal Relief can still be claimed on a sale of the property in the following three years
- From April 2025 FHL income will no longer be part of ‘relevant UK earnings’ for the purpose of establishing how much an individual can contribute to a pension.
Whilst the changes will be unwelcome to some FHL businesses, the changes are relatively non punitive with no exit charge to tax and an apparent 8 month window in which to take stock and make decisions about the future.
The next step
To discuss how this announcement impacts your personal circumstances, please contact Graham Boar at the Letchworth office or your usual UHY adviser.
