Thousands of holiday homeowners face difficult decisions amid tax changes

From April 2025, the Furnished Holiday Lettings (FHL) tax regime will be repealed, aligning income from furnished holiday lettings with other forms of residential property income.

According to data, obtained through a Freedom of Information request by Price Bailey, over 130,000 individuals who generate income from furnished holiday lettings (FHLs) are expected to be affected.

The data reveals a 67% increase in the number SA105 Furnished Holiday Let taxpayer returns between the 2013-14 and 2022-23 financial years, reaching a total of 132,000. Despite a dip in growth rates during the pandemic, the subsequent year saw a spike, resulting in an average annual growth rate of six percent per year over the past decade.

SA105 returns for FHLs in the UK (thousands) from FY 2013-14 to FY 2022-23

Andrew Park, a Partner in the Tax Team at Price Bailey comments:

“Repealing the beneficial tax treatment for Furnished Holiday Lets, alongside increasing scrutiny from councils, with some regions charging second homes or holiday homes a premium Council Tax rate of up to 300%, could make running a Furnished Holiday Let and paying the mortgage unviable. For those who do continue to operate, their profitability will be squeezed. Everyone will feel the effect of this”.

Andrew continues: “Although there are changes for those with Furnished Holiday Lets – including companies, the most dramatic change is seen for private landlords who now won’t get full relief for mortgage interest if they are Higher Rate or Additional Rate taxpayers – and will end up paying tax on profits they haven’t really made, often with cash that will need to come from other sources.

Andrew concludes: “Fortunately, yesterday’s Autumn Statement has left the special rate of capital gains tax on selling residential properties unchanged at 18% for basic rate taxpayers and 24% for higher rate taxpayers.”