Changes Ahead for Holiday Let Investors

The UK government has announced plans to tighten the tax reliefs available to owners of furnished holiday lets, bringing them in line with buy-to-let properties. The changes, set to come into effect on 6 April 2025, have been met with mixed reactions from investors. While some are breathing a sigh of relief that the government has not completely abolished tax reliefs, others are concerned about the impact on their businesses.

What’s Changing?

Under the new rules, loan interest income tax relief will be restricted to basic rate for all holiday let owners. Capital allowances will no longer be available for new expenditure, but will be replaced with relief for replacing domestic items. Business CGT reliefs on chargeable gains on disposing of property will also be scrapped. Additionally, income from holiday lets will be excluded when calculating maximum pension relief.

Transitional Arrangements

However, existing holiday let investors will be able to continue claiming capital allowances on expenditure already incurred. Losses generated from a holiday lets business can be carried forward and set off against other property rental income. Roll-over relief, business asset disposal relief, gift relief, relief for loans to traders, and exemptions for disposals by companies with substantial shareholdings will also remain available to current qualifying lets, as long as conditions are met.

What Does This Mean for Investors?

While the changes are disappointing for some, the transitional arrangements offer a lifeline to existing investors. However, the new rules are likely to act as a barrier to new entrants in the holiday letting business. This might be part of a conscious policy to put a brake on investors owning property in holiday hotspots.

Seeking Specialist Advice

Businesses and individual owners of holiday lets are advised to take specialist advice to understand how these changes will affect their property portfolio. It’s essential to keep a close eye on the legislation as it passes through Parliament and becomes law.

Image: Holiday lets in a popular destination

What’s Next?

The changes to tax reliefs on holiday lets are just one part of the government’s broader efforts to reform the rental market. As the situation evolves, it’s crucial for investors to stay informed and adapt to the new landscape.

Image: Tax relief on holiday lets

Conclusion

While the changes to tax reliefs on holiday lets may seem daunting, the transitional arrangements offer a degree of comfort to existing investors. However, the new rules are likely to have a significant impact on the holiday letting business, and investors must be prepared to adapt to the changing landscape.

Image: Holiday letting business