NFU Mutual has urged owners of furnished holiday lets to act quickly to take advantage of tax benefits before they disappear in April 2025.
The new rules will align the tax treatment of furnished holiday lets with the long-term rental market, impacting those considering selling or gifting properties.
Currently, furnished holiday lets are treated as trading businesses, allowing owners to access capital gains tax (CGT) reliefs when selling or gifting.
From 6th April 2025, these rules will change, requiring sellers to pay up to 24% on gains.
Until then, sellers can claim “roll over relief” if reinvesting in a new holiday let or trading business, deferring some or all CGT.
Those not reinvesting may qualify for business asset disposal relief before the deadline, paying only 10% on gains up to £1m.
Sean McCann, chartered financial planner at NFU Mutual, said: “If disposing of your holiday let was already in your plans, there may be benefits in doing so before the changes come into force.”
“If you are selling and buying a new furnished holiday let or other qualifying trading asset, you can roll over all or part of the gain which allows you to defer all or part of the capital gain tax payable.
“Or if you are gifting the property, you and the person you are giving it to can claim “gift hold over relief.”
McCann added: “If you’re planning on ceasing your furnished holiday let business if you do so before 6th April you may be able to claim business asset disposal relief – which allows you to have £1m of gains during your lifetime taxed at 10%.”
For tax purposes, holiday lets must be available for hire for 210 days and rented for at least 105 days each year, with discounted rates to family not counted.
McCann said owners should consider making pension contributions from their let income, which is currently treated as earned income.
He said: “Profits from furnished holiday lets are currently treated as earned income and can be used to make pension contributions.
“This means that for every £80 paid in, HMRC will add another £20.”
He advised undertaking property improvements before 6 April 2025 to benefit from current tax reliefs.
He added: “Currently, if you spend money on improvements such as putting in a new kitchen, bathroom or central heating, you can claim 100 per cent tax relief.”
After this date, only repairs and replacements will qualify for relief, not capital improvements.
