Furnished Holiday Lettings (FHLs)
Important Update on Capital Allowances for Furnished Holiday Lettings
In March 2024, the UK Government confirmed that the Furnished Holiday Lettings (FHL) tax regime will be abolished from 6 April 2025. This means that from that date, owners of furnished holiday properties will no longer benefit from the specific tax advantages previously available under the FHL rules, including access to capital allowances.
If you bought or already own a FHL prior to 6 April 2025 then here are some important dates for claiming Capital Allowances:
Individuals:
• Tax year 2022/23 claim by 31.01.25
• Tax year 2023/24 claim by 31.01.26
• Tax year 2024/25 claim by 31.01.27
The KEY date for CLAIMS is 31 January
Companies:
• Year end 31.03.22 claim by 31.03.24
• Year end 31.03.23 claim by 31.03.25
• Year end 31.03.24 claim by 31.03.26
• Year end 31.03.25 claim by 31.03.27
The KEY date for CLAIMS is 31 March
In summary, valuable FHL tax relief is being withdrawn for companies from 01.04.25 and individuals 06.04.25. There are still opportunities to plan for losses generated that can be carried forward if not used by those dates. Claims can be carried back up to 2 years.
It is important you act so the deadline for claiming this valuable tax is not missed!
If you currently own a furnished holiday let, it is important to review your position before the changes come into effect. Capital allowances may still be available under the current regime up until April 2025. We recommend seeking professional advice as early as possible to ensure you maximise any remaining reliefs.
You can read the official Government update here.
Qualifying Properties
In order to qualify as an FHL a property must be:
- owned by a UK tax payer
- let on a commercial basis
- furnished so guests can be accommodated without the need for additional furnishings
- available to let for a minimum of 210 days a year (was 140 days)
- let for a minimum of 105 days a year (was 70 days)
- individual lets of no more than 31 days at a time to the same person
Other points to consider
HMRC have introduced averaging and periods of grace to allow the occupancy threshold to be satisfied whereby taxpayers can elect that their properties continue to qualify for FHL treatment.
The legislation is detailed and outside the scope of this brief note but please contact us for further details.
E.g. in a portfolio of 3 UK FHL’s, properties 1 and 2 were let for 115 days each and property 3 was let for 100 days. At first glance, property 3 fails the 105 days rule but since the average days let was 110 all 3 properties qualify as FHL’s.
Update from spring budget 2024
Following the recent Spring Budget announcements, the government has declared its intention to end the furnished holiday lettings (FHL) tax framework. This move aims to discontinue existing tax privileges for landlords operating short-term furnished holiday properties, favouring longer-term residential property rentals.
Among the current tax advantages, not limited to FHL proprietors, are deductions for interest on borrowings against taxable profits, capital allowances for fixtures, various capital gains tax reliefs (including business asset disposal relief, rollover relief, and gifts hold-over relief), and the classification of FHL profits as relevant earnings for pension purposes. Additionally, income from jointly held FHLs by married couples or civil partners avoids the default 50:50 income tax split.
Capital allowances are granted to FHL owners for fixtures and furniture within the property such as fitted kitchens, sanitaryware, heating, plumbing, electrical and lighting and more as well as furniture, often resulting in 100% relief in the year of expenditure.
It would appear that there are short term opportunities between now and April 25 (when the FHL rules are abolished) for purchases of existing FHL portfolios to acquire new properties. This is because Capital Allowances of the new FHL can be offset against the profits of other owned FHLs.
Therefore, it is crucial to consider completing purchases by March 31, 2025 (for companies) and April 5, 2025 (for individuals). Furthermore, as more details emerge, anyone owning or contemplating the purchase of an FHL property may wish to evaluate their options before the FHL rules are abolished in April 2025, as meticulous attention to the forthcoming details will be paramount. We believe this could have a significant impact on the FHL market.
If you wish to discuss your own personal circumstances please feel free to contact us for more information.
