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ATT responds to Abolition of the Furnished Holiday Lettings regime

10 September, 2024

The Association of Taxation Technicians (ATT) has submitted a response to the policy paper and draft legislation on abolishing the tax regime for Furnished Holiday Lettings (FHLs) with effect from 6 April 2025. 

The proposal to abolish the FHL regime was first announced at Spring Budget 2024. The draft legislation clarifies several aspects which were previously unclear, as summarised below. 

The ATT has raised a number of further queries, and called for robust guidance to help those affected understand the impact of abolishing the FHL regime.  Details of our queries and other concerns regarding the proposed abolition of FHLs can be found in our full response. 

Key points now clarified by the draft legislation are:

  • Tax relief for mortgage interest will be restricted to the basic rate of tax (as for 'ordinary' let properties).
  • Unused FHL losses at 5 April 2025 can be carried forward and offset against profits of a UK or overseas property business, as appropriate. 
  • No new capital allowance claims will be possible for former FHLs after 6 April 2025, but Writing Down Allowances on brought forward pool balances will continue to be available. 
  • For Capital Gains Tax (CGT): Rollover Relief, Holdover Relief and Business Asset Disposal Relief (BADR) will no longer be available from 6 April 2025, other than BADR where an FHL business ceases before that date (subject to the normal conditions being met). 
  • CGT reliefs for FHL disposals before 6 April 2025 subject to anti-forestalling measures, and will require a statement confirming the relevant conditions are met.
  • For former FHLs jointly owned by spouses or civil partners, profits will be deemed split 50:50 from 6 April 2025 regardless of beneficial ownership. Affected couples who own an FHL in unequal shares need act before 6 April if they wish to continue splitting profits based on their beneficial ownership. 
  • FHL income will no longer count as 'relevant earnings' for pension contribution purposes, so FHL landlords with little other income may need to review their pension contributions from 6 April 2025 to check whether tax relief will be available. 

The draft legislation may change again before it becomes law but any landlords of FHLs who are concerned about the proposals can use our Find an ATT member service to discuss the expected implications with a qualified Tax Technician.