Tax breaks axed for furnished holiday/short-term lets
We recently wrote about the changes Welsh Government are making to short-term and 'holiday' lets, including a new registration & licensing scheme and increased council tax.
On top of these changes, the new UK Government has announced that furnished holiday/short-term lets will be treated in the same way as other rentals when it comes to tax, with changes coming in from April next year.
The Government said the move "promotes fairness and aligns the tax rules for furnished holiday lettings with those for other property businesses".
What is a furnished holiday let?
To be a furnished holiday let, the property:
- Must be available for short-term letting to the public for 210 days and actually let for 105 days or more in each tax year.
- Should not be used as a long-term let of over 31 days for significant periods.
What will be different?
Tax advantages that landlords of furnished holiday lets have had over other property businesses will be removed. This will be done in four ways:
- Applying the finance cost restriction rules, meaning loan interest will be restricted to basic rate for Income Tax.
- Removing capital allowances rules for new expenditure and allowing replacement of domestic items relief.
- Withdrawing access to reliefs from taxes on chargeable gains for trading business assets.
- No longer including this income within relevant UK earnings when calculating maximum pension relief.
Implementation dates:
- from 1 April 2025 for Corporation Tax and Corporation Tax on chargeable gains
- on or after 6 April 2025 for Income Tax and Capital Gains Tax
Could a switch back to a long-term rental be right for you?
We've already helped some landlord clients switch back to the traditional rental market following these announcements, and we anticipate that many more will follow suit. Shifting back to traditional long-term rentals offers several benefits for landlords, including:
- Reduced management: Long-term lets generally require less management and administration compared to short-term lets. The fewer changeovers in occupants you have, the less time needed for managing individual stays.
- Steady income: Renting your property long-term unlocks a stream of steady income, boosting financial stability and security. Additionally, the risk of prolonged void periods is significantly lower.
- Reliable contract-holders: With a property management agency like ours, you can find reliable, screened contract-holders who will care for your property.
Working with professionals will provide peace of mind throughout the process. If you want to be more hands-on with long-term renters, you can be – we’ll have a service to suit.
Alternatively, if preferred, we can provide a fully managed service and do most of the work for you. Find out more here or get in touch on 02920 454555 to explore your options.
The information contained within this article was correct at the date of publishing and is not guaranteed to remain correct in the present day.
