TAX CHANGES to the Furnished Holiday Let / Serviced Accommodation Market

Описание: Tax “Advantages” of Furnished holiday Lets abolished!
Budget Mar 2024 announced that the “advantages” of Furnished Holiday Lets (FHL) will be abolished from 6th April 2025.

What this really means is that the tax disadvantages of letting residential property owned in your own name will not only unfairly apply to residential landlords letting to families but will now also apply to those renting a holiday home to holiday makers on short term lets (AKA Serviced Accommodation)

FHL properties owned in own name will have similar income tax rules as BTL. Section 24 rules will also apply to FHL

Income from FHL no longer counts towards income for pension contributions purposes

Business asset disposal relief at the CGT 10% rate will no longer be available for qualifying assets, and so any CGT will be payable at either 18%, or the reduced higher rate of 24% (down from 28%). A qualifying asset needs to have been run as FHL for at least 2 years prior to sale, so, if you only started to do this within the last 12 months with the intention of then selling to pay CGT at the reduced rate of 10% then unlucky, you won't be able to! Anti forestalling rules will apply with an effective date of 6 March 2024 which means that if you were thinking of selling and claiming the lower 10% rate then you will most likely need to be able to show your intention to sell was there prior to 6 March 2024 e.g. was on the market with an MAR

https://www.property118.com/removal-o...

Those that wish to change use to serviced accommodation in the future will require planning permission. In some areas this will be automatic under permitted development rights, in other areas it will require a successful full application. Existing operators will be automatically granted permission.

All units will need to be registered with local authorities. This probably will be similar to HMO licensing. It could result in costs to bring properties up to H&S compliance levels. It probably will involve the need to inform the lender. So….if you are running a serviced accommodation unit on a BTL mortgage (not that you should be) then be very careful and consider getting the right mortgage in place asap

So….what can you do??? Many BTL operators were faced with this dilema when S24 was introduced, and the answer for many was to either sell up, or, incorporate in to a Ltd company, via a partnership, operating for at least 2 years, but often more like 3 years, in order to make the necessary claims required for incorporation relief to avoid CGT and SDLT on the transfer of assets to the Ltd company

Interesting side note…. Whilst the “tax advantages” of SA have been abolished, and brought in to line with Residential Letting, there is no comment from the chancellor on removing VAT from holiday rentals to bring that in line with the VAT exempt status of residential letting, or indeed, for residential letting VAT exempt status to change so that rents start to attract VAT in the future!! Although that would add 20% cost to all the renters in the PRS overnight if introduced at the standard VAT rate!

Music from #Uppbeat (free for Creators!):
https://uppbeat.io/t/sensho/good-times
License code: ACXPT3JXBLXZ2D9N