Furnished Holiday Lettings: Reaction

The Chancellor, Jeremy Hunt, announced in the 2024 Budget, that the concept of Furnished Holiday Lettings (FHLs) will be abolished from April 2025, removing the associated tax reliefs.

The details relating to the announcement were not included in the Finance Bill (No. 2). Some expected draft legislation to be published on ‘Tax Administration and Maintenance Day’ (18 April) but nothing was forthcoming. Some commentators have surmised that the measure was ‘last minute’ and that it will be a while before detailed legislation will be published.

Further detail cannot come soon enough, however. In order for accountants and agents to effectively advise their clients, they need to know about the Treasury’s plans in good time. The one thing that is certain is that 6 April saw the start of a period of concern and uncertainty for those with FHLs.

The measure was announced as a means of making more affordable homes available. The increase in FHLs has resulted in fewer homes available for residents, particularly in tourist hotspots. According to BBC research, the number of holiday lets rose by 40% between 2018 and 2021, with tourist areas seeing the sharpest increases.

Housing and poverty campaigns, however, have said that the measure is “too little, too late”.

The measure should not be considered in isolation; in the Budget, the Chancellor also announced the abolition of stamp duty land tax multiple dwellings relief (SDLT MDR) from 1 June 2024 and a 4% cut in the higher capital gains tax rate (CGT) on residential property disposals to 24% from 6 April 2024. These measures not only incentivise disposing of FHLs, but dissuade landlords from buying more. In addition, non-tax measures such as the proposed licensing and registration schemes for holiday lets, to be introduced from the Summer of 2024, will mean owning a holiday let will entail even more compliance costs.

Those in the Tourism sector are concerned that the decrease in supply of holiday lets will have a knock-on impact for businesses and workers who rely on tourism.

Meanwhile, property experts are unsure if the measures will substantially increase the number of long-term lets. Whilst the rate of CGT has been cut, the Annual Exemption has decreased to £3,000 for 2024/25. Property experts predict that selling prices for FHLs will decline, given that new owners will no longer be able to claim tax advantages. This could results in FHL owners keeping their properties and simply not bothering to rent them out.

Should you have any questions concerning the above, please call 023 8046 1254 or email Tom Young.