The Abolition of Furnished Holiday Tax Let Regime: What it Means for the Self-Catering Sector

This was held on 14th August 2024

The Abolition of Furnished Holiday Let Tax Regime: What it Means for the Self-Catering Sector

We were optimistic that the plans to abolish the furnished holiday lettings tax regime had been set aside, especially since the proposal didn’t make it through parliament before the general election campaign. However, with the new Labour government now in power, they have decided to revisit this issue as part of the spring budget proposal. This update was recently posted on the HMRC website.

The main changes are going to be:-

• Mortgage interest will no longer be tax deductible in full;
• Capital allowances (a special tax relief) for new expenditure like new bathrooms will no longer be available and instead only relief for replacement for certain domestic items will be allowed;
• Certain Capital Gains Tax reliefs will no longer be available if the properties are sold or disposed of (meaning tax at higher rates);
• Profits from FHLs will no longer count as relevant earnings for personal pension contributions​;

Although the Government say they are bringing the different property rules in line with each other, FHL income will still be subject to VAT, while long term property rental income will not.

• What does this mean for you?
• What can you do?
• How might you respond to the Consultation?

Join Fiona Campbell of ASSC, John Endacott and Victoria Hutson of PKF Francis Clark to discuss how this could affect your business.

Fiona Campbell, CEO, ASSC, said: “Both the Scottish and UK governments should be laser focused on a pro-small business, pro-growth agenda to help revitalise our economy. Unfortunately, the abolition of the current tax regime runs contrary to that objective and will damage a key part of our tourist economy which supports jobs and livelihoods in communities across the UK.

“This is particularly unfortunate news for the sector in Scotland, as self-catering operators continue to be hammered by the costs associated with the Scottish government’s onerous short-term let licensing and planning regulations and who will also face the introduction of a visitor levy. Scrapping the FHL tax regime will make a bad situation much worse. 

“We would encourage all affected stakeholders to engage with the Treasury’s consultation on FHLs, highlighting the negative impact this will have for small businesses.”

Alistair Handyside, Chair, PASC UK, said:

“PASC UK led one of largest ever sector pushbacks on this when it was first raised in the spring budget, ending up being the only sector association to meet in person with both the Treasury Minister and Chancellor. Both committed to further meetings and to hold a sector consultation – and the email confirms this will be the case. So it’s all to play for. Previous to the election, we gathered and presented a vast amount of evidence to various government departments, so are ready to go again on this.”

“If the abolition goes through as proposed, the first casualties will be small self-catering businesses in coastal and rural areas. These form the bed stock of the fragile eco-system that makes up these visitor economies. If you damage the bed stock – as will happen if this goes through – you will see pub, restaurants, and visitor attractions closing too, as guests who stay in our sector spend money in these local businesses, far exceeding what locals spend.”

“The policy is at odds with the new government’s stated ambition for economic growth, adding, ‘we will be making that point loudly and clearly on behalf of the sector’.”