Blog Layout
The Future of the Furnished Holiday Let (FHL)
The Future of the Furnished Holiday Let (FHL)
As announced in the 2024 Spring Budget, the Furnished Holiday Let (FHL) regime will come to an end on 5 April 2025. After repeal, former FHL properties will form part of an individual’s property business and be subject to the same rules as non-furnished holiday let property businesses.
To qualify as an FHL, a property must have been available as holiday accommodation for at least 210 days of the tax year, and booked for 105 days, with individual stays lasting no longer than 31 days.
Under the existing FHL rules, any property qualifying as an FHL was treated as a trade and so benefited from several tax advantages. However, following the abolition of the FHL regime, the following rules will come into effect:
- There will be no capital allowances for any new capital expenditure. Instead, rental properties will now receive the replacement of domestic items relief.
- Tax relief on loan/mortgage interest will be restricted to the basic rate of income tax at 20%.
- Rental profits must be split between individuals based on the legal ownership of the property. Previously, the split of rental profits could be varied between owners ie. 80:20 vs 50:50.
- Tax reliefs for capital gains arising from the sale of FHL properties such as Business Asset Disposal Relief, Rollover Relief and Gift Relief will no longer be available.
- Rental profits will no longer form part of relevant earnings for determining how much tax relief an individual can receive from pension contributions made.
- As part of the transition away from the FHL regime, the following rules will also apply:
- Losses created before the 5 April 25 can be carried forward to be used against future rental profits.
Business Asset Disposal Relief will still be available for sales of FHL properties for a 3-year period following 5 April 2025, provided conditions to qualify for the relief are met prior to 5 April 2025.
- Existing capital allowances pools can continue to be written down after 5 April 2025 until fully utilised.
- On abolishment of the FHL regime, there will be no balancing charges on capital items where capital allowances have been claimed previously.
Actions to consider:
Making use of capital allowances
– anyone running an FHL should ensure they have claimed capital allowances for all capital items purchased. Any significant planned expenditure on properties should be completed before 5 April 2025.
Consider selling
– If you’re considering selling the property soon, it may be worth doing so before 5 April 2025. The property could be sold to benefit from a more favourable tax rate on capital gains under Business Asset Disposal Relief. However, if the FHL conditions were met before 5 April 2025, the reduced tax rate will still be available for a 3-year period after cessation of trade.
Incorporating
– the FHL business and property can be transferred into a limited company where there are more favourable tax rates and greater opportunities for tax planning. However, there are potential stamp duty liabilities that will need to be considered.
To discuss the abolishment of the furnished holiday let regime, contact our experienced team of accountants at 01423 222710.
on it and delete this default text and start typing your own or paste your own from a different source.
If you found these news items interesting please feel free to share with your friends, family and colleagues.
When you are starting a new business venture. you’ll want to think carefully about how to structure it and whether you opt to be a sole trader or register as a limited company.
Expenses can be one of the most confusing aspects of VAT, so we look at some of the key rules.
Thank you to everyone who joined us for our 15th birthday party and all who have supported us over the years.
Wild & Co were proud to be finalists in the Harrogate Advertiser Business Awards.
Nobody wants to have to go through the time, stress and inconvenience of an HMRC enquiry but there are things you can do to reduce the risk of it happening.
If you are donating to charity, you may be wondering if it is better to give as an individual or through a business.
A cloud accountant will set up your digital accounting systems in a way that works for you and your business.
The intrepid Wild Walkers took on the mighty Yorkshire 3 Peaks to raise money for Harrogate Homeless Project.
If you are self-employed or a company director, you need to know how to present your earnings and how they will be evaluated by the mortgage provider.
Under the new rules, R&D tax claims involve completing a claim notification form followed by an additional information form.
