Major Tax Changes Coming for Holiday Let Owners
From 6 April 2025, the UK government is scrapping the tax benefits for Furnished Holiday Lettings (FHLs). If you own a holiday let, this could significantly impact your finances. Here’s what’s changing and what you can do to protect your profits and minimise tax liability.
What’s Changing?
Until now, FHL owners have enjoyed tax advantages that made holiday lets more attractive than traditional buy-to-lets. However, from April 2025, those benefits will disappear. The key changes include:
✅ No more tax breaks on profits – Holiday lets will be taxed like standard rental properties.
✅ No more 100% mortgage interest relief – Instead, you’ll only be able to claim tax relief at the basic rate of 20%, significantly reducing your tax efficiency.
✅ Higher Capital Gains Tax (CGT) when selling – The Business Asset Disposal Relief (BADR), which allows CGT at just 10%, will no longer apply.
✅ Loss of capital allowances – You’ll no longer be able to claim tax deductions on equipment and furniture within the property.
For many landlords, these changes mean higher tax bills and lower profitability. So, what should you do next?
1. Consider Selling Before the Tax Perks Disappear
If you were already thinking of selling your holiday let, acting before April 2025 could save you thousands in tax. Right now, you can benefit from:
✔ Business Asset Disposal Relief (BADR) – Sell before April, and you could pay just 10% in Capital Gains Tax, instead of 18% or 28%.
✔ Stronger demand – Buyers looking to take advantage of the existing tax perks may be more motivated to buy before the deadline.
✔ Property market uncertainty – The market could shift as more landlords try to sell in 2025, potentially driving prices down.
📌Action Tip: If selling is an option, speak to an accountant or tax adviser now to assess the potential tax savings.
2. Switch to a Long-Term Rental Model
After April 2025, FHLs will be taxed like standard buy-to-let properties. While this means higher taxes, long-term letting could still be a stable and profitable alternative.
✔ Lower running costs – No need for constant guest turnover, cleaning, and management fees.
✔ Steady rental income – Long-term tenants provide reliable income without seasonal gaps.
✔ Lower admin burden – Less frequent marketing, fewer void periods, and simpler tax reporting.
However, switching means:
❌ Losing flexibility – You won’t be able to use the property whenever you like.
❌ Lower rental income in peak seasons – Holiday lets often command much higher rents per night.
📌Action Tip: Compare your current income with potential long-term rental income. Run the numbers to see if long-term letting makes financial sense.
3. Could You Gift the Property to Family?
If your goal is to pass your holiday let to family, you may want to act before the tax changes.
✔ Use Holdover Relief – This allows you to transfer the property to a family member without triggering an immediate CGT bill.
✔ Plan for Inheritance Tax (IHT) – Gifting a property early can reduce the overall IHT burden if you survive at least seven years after the transfer.
📌Action Tip: If gifting is part of your long-term plan, consult a tax professional to explore your options before the FHL status disappears.
4. Review Your Mortgage and Finance Options
If you plan to keep the property, your mortgage interest relief will drop significantly. You’ll only be able to claim basic rate relief (20%), instead of deducting 100% of interest costs against your rental income.
✔ Consider refinancing – Lock in a competitive mortgage rate before the rules change.
✔ Explore alternative tax strategies – For example, owning the property through a limited company could provide better tax efficiency.
📌Action Tip: Speak to a mortgage broker or tax advisor about the best financial structure for your property investment.
Final Thought: Don’t Wait Until the Last Minute
These tax changes will have a significant impact on holiday let landlords, but with careful planning, you can mitigate losses and make the best decision for your property portfolio. Whether you choose to sell, switch to long-term letting, or restructure ownership, now is the time to act.
Need expert advice? Contact us today to discuss your options and make an informed decision before the April 2025 deadline!
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This is a once-in-a-lifetime tax change. Don’t wait – speak to us now to explore your best options before the tax advantages disappear!
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