In Jeremy Hunt’s last budget as Chancellor, it was announced that the Furnished Holiday Let (FHL) regime would be abolished, taking effect from April 2025. At that time, only a brief warning was issued about potential anti-forestalling measures through unconditional contracts, with little further detail provided.
Even with a change in government, the new Chancellor, Rachel Reeves, confirmed on 29 July 2024 that this abolition will proceed as planned, offering some additional insight into the upcoming changes.
While the final date remains April 2025, draft legislation is still pending, leaving some aspects uncertain. However, recruitment business owners with FHL should be aware of the following likely changes:
- Tax Relief Adjustments: From April 2025, any borrowings tied to an FHL will only qualify for basic rate tax relief, bringing it in line with other UK residential lettings.
- Capital Allowances: As of April 2025, you will no longer be able to claim capital allowances in relation to your FHL business. However, existing capital allowance pools can still be written down, and there will be no balancing charge/exit cost.
- Loss Treatment: Losses associated with FHLs, whether already existing or newly incurred, will be treated as standard letting losses rather than business losses starting in April 2025.
- Capital Gains Tax Changes: Capital gains tax benefits tied to FHLs will end in April 2025. However, if your FHL business is wound up before this date, there may still be opportunities to claim Business Asset Disposal Relief on property sales within the next three years.
- Pension Contribution Impact: Starting April 2025, income from FHLs will no longer be considered ‘relevant UK earnings’ for determining pension contribution limits.
Although these changes may pose challenges, they are relatively measured, with no immediate exit tax and a valuable eight-month window to evaluate your options and plan for the future. Recruitment business owners with FHL should use this time to review their financial strategies and make informed decisions.
Contact Us
Contact Recruitment Accountants today to discuss how this announcement impacts your personal circumstances. You can email us at hello@recruitmentaccountants.com or call us at 0845 606 9632 to speak with one of our experts.
