HMRC have issued a policy paper confirming that the current tax treatment of furnished holiday lets will cease from 6th April, 2025 with draft legislation published accordingly. From that date furnished holiday lets will be treated the same as other rental property for income and capital gains tax purposes.
HMRC have confirmed the following:-
- Where a furnished holiday let business has a capital allowances pool written down value at 5th April, 2025 they can continue to claim writing down allowances on that pool, but any new expenditure from 6th April, 2025 will be treated the same as other rental businesses, i.e. will be eligible for replacement of domestic items relief if appropriate, but no capital allowances on integral fixtures etc.
- Any furnished holiday let losses carried forward at 6th April, 2025 can be set against future profits of the property business. The property business will consist of all rental properties including those that were holiday lets under current rules. So effectively any holiday let losses carried forward at 6th April, 2025 will be set against general rental income.
- For all furnished holiday let properties sold before 6th April, 2025 the three year rollover relief window will continue to apply so reinvestment of the proceeds in replacement business assets other than holiday lets can take place after 5th April, 2025.
- Where the furnished holiday letting conditions have been satisfied in respect of a business that ceases prior to 6th April, 2025 business asset disposal relief will still apply to a disposal within 3 years of cessation. The switch from furnished holiday let to rental property rules from 6th April, 2025 will not be a cessation of the furnished holiday let business for these purposes.
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