The 2024 Spring Budget brought a crackdown on the short-term letting sector. With changes to tax, planning and more, here’s what you need to know for your property investment business.
The government announced several changes to short-term properties and holiday lets in the 2024 Spring Statement that will change how you run your short-term letting business. Below, we run through what’s changing for your holiday let properties and what you need to be aware of.
Tax Changes
The government is abolishing the Furnished Holiday Lettings (FHL) Tax Regime, which will remove the tax advantage for landlords letting out short-term furnished holiday properties. The scheme will stop in April 2025 in an attempt to boost the supply of longer-term residential properties to tenants.
The FHL tax regime currently allows holiday let landlords to deduct the full cost of your mortgage interest payments from their rental income, entitles you to capital allowances on the furniture, pay lower capital gains tax (CGT) when selling the property, and CGT rollover relief.
As it stands, we’re still waiting for the government to publish the draft legislation with further details. The proposed changes align the tax treatment of holiday let landlords with the buy to let sector. Still, as holiday lets have become a growing market space for property investors, it remains an unwelcome announcement.
Planning Rules
New reforms will give local councils greater power to ‘control’ short-term lets by making them subject to the planning process. This is a further attempt to boost the housing supply for locals in tourist areas.
The proposed changes will create a new planning ‘use class’ for short-term and holiday lets that are not used as a sole or main home. What’s positive is your existing dedicated short-term lets will be automatically reclassified into the new, correct-use class and will not require a planning application.
Furthermore, there is the intention to introduce associated permitted development rights to allow a property to be changed to a short-term let and from a holiday let to a standard residential dwelling. As part of the government’s plans to give greater control to the communities, local authorities will be able to remove these permissions and require full planning permission should they deem it necessary.
It’s expected that the complete timeline for implementing the use class and permitted development rights will be introduced in the summer.
Registration Schemes
A new mandatory national register has been announced, which will give local authorities further information about short-term lets in their area. The idea behind this register is to give councils a better understanding of the number of holiday and short-term lets in their area, as well as ensure they adhere to safety and quality standards. This is currently at the consultation stage, with a full response expected to be published later this year.
What you need to do
As always, the devil will be in the details with all these announcements, and we await further clarification on how these changes will be implemented. For now, it’s essential to stay informed on the latest legislation news to ensure you keep your property investments up to date.
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