31 October 2024The government has announced that it is abolishing the specific tax treatment and separate reporting requirements for furnished holiday lettings (FHLs). Once removed income and gains from an FHL will form part of the person’s UK or overseas property business and be treated in line with all other property income and gains.
The measures align the tax rules for FHLs with those for other property businesses. Legislation will be introduced in the next Finance Bill to provide for the withdrawal of FHL rules. This change will remove the tax advantages that current FHL individuals and corporate landlords have received over other property businesses in four key areas by:
- Applying the finance cost restriction rules so that loan interest will be restricted to basic rate for Income Tax
- Removing capital allowances rules for new expenditure and allowing replacement of domestic items relief
- Withdrawing access to reliefs from taxes on chargeable gains for trading business assets
- No longer including this income within relevant UK earnings when calculating maximum pension relief
