Furnished holiday lets – changes are coming!

Furnished holiday lets – changes are coming!

With effect from 6 April 2025, loan interest for holiday let businesses operated by individuals will cease to be a deduction and relief but will instead be given as a 20% tax credit from the individual’s tax liability which was announced by the Chancellor in the Budget earlier this year.

The Chancellor Jeremy Hunt argued that the tax changes would free up more accommodation for local people in certain areas and reduce the tendency to invest in short-term lets due to their favourable tax treatment.

There are certain parts of the country where the current regime with the particular beneficial rates for furnished holiday let (FHL) properties is creating an incentive for a disproportionately large number of properties to be FHL, therefore short term rentals rather than long term rentals.

The treasury have made it clear that they are not abolishing FHLs, as these play a vital role in our tourism ecosystem, and that the intention is for the tax reform to apply to all properties, so for example there will continue to be benefits.

As an example after abolition of FHL, a higher rate taxpayer landlord with mortgage interest costs of £12,000, would still get £2,400 taken off income tax bills in terms of relief, and can still spend further on insurance, letting agents, replacing domestic items etc which could save further money by using tax reliefs available for all landlords.

If you need some help with your self assessment tax returns, please get in touch and we will be pleased to assist you here at Kennedys Accounting.