UK Spring Budget Scraps Tax Relief for Short-term Lets and Abolishes the Furnished Holiday Lettings Regime

Chancellor Jeremy Hunt delivered his Spring budget this afternoon and as part of the Conservative party’s plans for the UK and their campaign to win public favour ahead of the coming election this year, announced that the UK government would be scrapping the tax relief that investors benefit from for their furnished holiday lettings (FHLs) or as they are more widely known, holiday lets, and has abolished the entire Furnished Holiday Lettings Regime which previously allowed investors to claim tax relief on their properties and make tax-advantaged pension contributions.

UK government abolishes tax relief for holiday lets

The UK government abolished the Furnished Holiday Lettings Regime this afternoon as part of Chancellor Jeremy Hunt’s Spring Budget that took place at 12:30 pm UK time, which previously provided tax relief to investors who had furnished holiday lettings (FHLs) – more commonly known as holiday lets – in a bid to allow renters across the country who are looking for long term rental properties the chance to find somewhere to live and prevent properties sitting vacant and only benefitting the holiday goers in the areas most affected.

The Furnished Holiday Lettings Regime not only provided capital gains tax relief to investors who owned properties solely for holiday lets but also allowed them to make tax-advantaged pension contributions, meaning there were higher incentives to purchase a property for short-term lets over long-term lets, and in turn, removing properties from the market that could be used for long term lets at a time when supply and demand within the UK rental market is at the highest it's ever been.

Capital Gains Tax thresholds cut to increase revenue in UK property market

In addition to the Furnished Holiday Lettings Regime being abolished by Rishi Sunak’s government, Chancellor Jeremy Hunt also announced a cut on the highest end of capital gains tax by bringing the previously implemented 28% threshold down to 24% and claiming that by reducing the tax allowance, more transactions were likely to happen and therefore bring more revenue into the UK property market – a claim that Hunt stated was backed by the Office for Budget Responsibility (OBR).

Investors now expected to choose long-term rentals over holiday lets

With the changes announced today in the highly anticipated Spring Budget, there will no doubt be less incentive to invest in properties for the benefit of short-term or holiday lets, meaning more investors are likely to flock to the long-term property opportunities that provide a longer-term stable income now that the tax relief and tax-advantaged pension contributions have been removed for short term lets.

To learn more about long-term investment opportunities in the UK and how you can benefit from a more stable source of income now that the Furnished Holiday Lettings Regime has been abolished, get in touch with our team of property experts today or call directly at +44 161 791 4600.