The move aims to improve year-round housing stock in high-tourism areas
The government will abolish the Furnished Holiday Lettings tax regime, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. This will take effect from April 2025.
At the moment, landlords who use the furnished holiday lets regime can deduct the full cost of their mortgage interest payments from their rental income, are entitled to capital allowances on the furniture, pay lower capital gains tax (CGT) when they sell and are entitled to CGT rollover relief.
Draft legislation will be published in due course and include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.
While the changes proposed represent an element of simplification, by aligning the tax treatment of landlords irrespective of short or longer lets, with the overall aim of increasing year-round housing stock in high tourism areas, nevertheless it will be an unwelcome shock for many.
The Chancellor also abolished Stamp Duty Land Tax (SDLT) relief for the simultaneous purchase of multiple properties (multiple dwellings relief). Taken together, these measures will affect property investors, but will balance this alongside the unexpected CGT reduction.