Important Tax Changes for Holiday Let Owners: What You Need to Know

If you own a holiday let with Short Let Space, you may have heard about the recent tax changes announced by the UK Government. From April 2025, the Furnished Holiday Lettings (FHL) tax regime will be abolished. This means that holiday lets will be taxed in the same way as long-term rental properties.

But what does this mean for you as a holiday let owner? Let’s break it down in simple terms.

What’s Changing?

Under the current FHL tax regime, holiday let owners benefit from:

• Mortgage interest relief (offset against rental income)
• Capital allowances (claiming tax relief on furniture and equipment)
• Capital Gains Tax (CGT) reliefs (such as Business Asset Disposal Relief)

From April 2025, these benefits will no longer apply. Instead, holiday lets will be treated as regular rental properties, meaning:

• You won’t be able to deduct the full cost of mortgage interest (only basic rate relief will apply)
• Capital allowances will no longer be available
• CGT reliefs will no longer apply, potentially increasing tax bills when selling a property.

How Will This Impact You?

The main impact will be on your tax bill. You may find that:

• Your profits are taxed at a higher rate because mortgage interest relief is reduced
• You can’t deduct expenses like furniture and fittings in the same way
• If you sell your property, you might pay more Capital Gains Tax

However, holiday lets can still be a great investment. The demand for short stays continues to grow, and higher rental income from holiday lets often makes up for tax changes.

What Should You Do Now?

Here are a few steps to prepare for the changes:

• Speak to an accountant: they can help you understand the specific impact on your finances and suggest tax efficient strategies.
• Review your pricing and costs: adjusting your rental rates and managing expenses efficiently will help maintain profitability.
• Consider alternative ownership structures: some owners may benefit from switching to a limited company structure (check with a tax professional).
• Keep focusing on guest experience: higher occupancy and great reviews will ensure you continue to maximise your earnings.

Short Let Space is Here to Help

At Short Let Space, we understand that changes like this can be concerning. Our team is here to support you in making your property as profitable as possible. Whether it’s adjusting your pricing strategy or ensuring high occupancy rates, we’ll help you make the most of your holiday let.

By staying informed and planning ahead, you can continue to enjoy the benefits of owning a successful holiday let.

If you have any questions or need advice, feel free to get in touch with our expert team by sending us a message or calling us on 01993 222 200.