If you own a Furnished Holiday Let it is imperative that you contact HMA Tax prior to March 31st 2025 as you could be miss out on thousands of pounds of unclaimed tax relief.
As the April tax deadline draws near, holiday let owners have a time-sensitive opportunity to capitalise on significant tax relief through a Capital Allowance Claim. For owners of Furnished Holiday Lets (FHLs), filing a claim before March 31st can lead to significant tax savings by reducing taxable profits, freeing up funds for reinvestment, and helping you stay competitive in the market.
The 2024 Autumn Budget hinted at changes to the Furnished Holiday Lets tax regime, proposing its removal from April 2025 with a potential transition period. While this might give existing Furnished Holiday Lets owners time to adjust their strategies, uncertainty persists due to the absence of concrete legislation.
Key Points to Keep in Mind:
- Stay Informed: Owners should remain vigilant, as any changes could significantly impact tax planning and property profitability.
- No Legislation Yet: The removal of the regime remains speculative until legislative amendments are introduced. There is still a possibility that the regime will continue or that the timeline for its removal could shift.
Does your Furnished Holiday Let qualify for a Capital Allowance claim?
To benefit from a Capital Allowance claim, your Furnished Holiday Let must meet specific requirements set out by HMRC. These criteria ensure that the property is genuinely operated as a commercial holiday let, providing a high standard of accommodation and contributing to the tourism industry. Understanding and meeting these requirements is crucial for unlocking the tax relief available to FHL owners.
Your Property Must Be Furnished: Your property needs to be sufficiently furnished to provide for a comfortable self-catering stay. While the exact level of furnishing is not strictly defined, ensuring your property meets guest expectations is vital. Consulting an experienced holiday letting agency can help you comply with this requirement.
Intent to Make a Profit: The property must be let commercially with the aim of making a profit. While it’s not mandatory to actually make a profit in the early stages, demonstrating intent—through a business plan or listing with a reputable agency like Sykes—makes this requirement easier to fulfil.
Availability to Let: For the first 12 months of operation, your property will be in a “probationary” period. To qualify as an Furnished Holiday Lets during this time:
- The property must be available to let for 210 days (30 weeks).
- It must be commercially let for at least 105 days (15 weeks).
- It cannot have more than 155 days of long-term occupation (31 days or more by the same person or group).
Days used by you, your friends, or family at a discounted rate unfortunately don’t count toward the commercial let total. However, it is important to note that if you own multiple holiday lets, occupation figures can be averaged across your entire short-term accommodation portfolio.
With uncertainty looming, the time to claim is now.
The 2024 Autumn Budget introduced potential changes to the Furnished Holiday Lets tax regime, proposing its removal by April 2025. While the transition period offers some time to adjust, the lack of concrete legislation leaves owners in a state of uncertainty. For now, the regime remains in place, making this an ideal moment to act.
Capital Allowances provide tax relief on qualifying expenditures for fixtures and fittings within your property. For Furnished Holiday Lets, eligible items may include:
- Kitchens and bathrooms
- Heating and cooling systems
- Electrical installations
- Furniture and appliances
As the end of the fiscal year approaches, making a claim ensures that you optimise your tax position for this tax year, reducing your immediate liabilities. Waiting could delay your ability to offset profits and reinvest in your property for the coming season.
Case Study 1: Maximising Tax Relief on a Coastal Cottage
The Situation: A couple in Cornwall had been running a seaside holiday let for two years but had never made a Capital Allowance claim. They had invested heavily in refurbishments, including a modernised kitchen, energy-efficient heating, and new furniture, but were unaware these costs qualified for tax relief.
The Solution: With expert assistance, they conducted a Capital Allowance review and identified over £75,000 of qualifying expenditure. The claim reduced their taxable profits by £75,000, leading to a tax saving of over £22,500.
The Result: This financial boost allowed them to reinvest in the property, adding an outdoor hot tub and patio area—all before the April tax deadline.
Case Study 2: Transforming a Heritage Property into a Modern Holiday Let
The Challenge: An investor in the Lake District converted a historic barn into a modern holiday let but had no idea that many elements of the renovation were eligible for Capital Allowances. The project included modern lighting, underfloor heating, and a stunning glass windows.
The Solution: By consulting a specialist, they identified £120,000 in qualifying expenses. The investor was able to claim £36,000 in tax relief, significantly improving the return on investment for the renovation.
The Result: The tax relief freed up funds for a targeted marketing campaign, helping secure nearly full occupancy during peak seasons.
Speak with a Claims Specialist for a free consultation
Claiming Capital Allowances for Furnished Holiday Lets ensures that you receive all the tax relief that you are entitled to—from smaller items like curtains to significant investments like structural fixtures. This process requires expert knowledge to identify, value, and claim eligible expenses, which is something many accountants often overlook.
At HMA Tax, we specialise in identifying eligible Furnished Holiday Lets, making the process seamless while maximising your tax savings.
