Changes to Furnished Holiday Lettings

In the 2009 Budget the Chancellor announced that HMRC are to repeal the Furnished Holiday Letting ('FHL') rules from tax year 2010/2011. Therefore the current year is the last year that you'll be able to obtain the generous tax advantages outlined above. How will my FHL income and gains be treated after 6 April 2010? After April 2010 your FHL income will be treated as 'standard' rental income. So if the property is in the UK the rental income will be classed as income from a UK property business. If you have any other UK properties the income will be consolidated with the other property income. You'll also be able to claim the wear & tear allowance if it's let as a furnished property. If the property is located overseas the income will be classed as part of an overseas property business. Your income tax bill will be likely to remain pretty similar, as FHL status really only effected income tax in that you could claim capital allowances. Therefore if you had limited asset purchases, and didn't use the FHL income to generate pension contributions your income tax bill would be more or less the same. The FHL rules didn't impact on the deductibility of expenses as 'standard' investment properties can still qualify for expense deductions on the same basis. The big difference may be in terms of CGT, given that the CGT rate would be 18% on a disposal rather than the 10% effective rate that FHL owners can currently qualify for.