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Lewis Gimple, our Capital Allowances Surveyor takes a look at Furnished Holiday Lets and how Capital Allowances are affected from the Spring Budget.

The Spring Budget and what it means for FHL owners and capital allowances

The chancellor announced in the spring budget that they will be abolishing the furnished holiday lettings regime. They are yet to publish the draft legislation, so we do not know what aspects of the tax regime they could keep, revise or whether this is a total abolishment.

The main benefits to be abolished of the current tax regime on FHL’s include:

  • Remove the ability to deduct mortgage interest in full and change to a 20% deduction as with all other residential property.
  • Increase capital gains tax from 10% & 20% to 18% & 24% as per the new higher rate on residential properties.
  • Removal of the business asset disposal relief, meaning you are liable to pay capital gains on the entire period the property was being traded, not just occupied.

These changes are due to come into effect form 1st or 5th April 2025 depending on whether you are a company or individual.

We are currently unsure whether the government plans to keep the 210 days per year available for occupation & 105 days of occupation rules, and this is something that will need to be confirmed in the draft legislation.

There could also be a removal of the ability to claim capital allowances on the plant & machinery, furniture, and integral features.

What to do next?

If you have recently purchased a FHL (within the last tax year) then you should get in touch with us as you might be entitled to a capital allowance claim on the property.

Alternatively, if you are looking to sell your FHL in light on the news today, you should also contact us as may be entitled to a capital allowance claim too. If you are going to be selling a property, then you need to make sure you exchange and complete before April 2025.

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