The Treasury has decided against exempting any properties from the upcoming changes to the tax rules for furnished holiday let scheme, which will come into effect next year.
Starting on 6 April 2025, the interest businesses owned by individual landlords will no longer be deductible. Instead, a 20% tax credit will be applied to the individual’s tax bill.
Several Members of Parliament, spearheaded by Peter Aldous, have been pushing for certain exemptions in the new rules for holiday lets, and they’ve also suggested the government should consult the public before implementing these changes, which were announced last month during the budget announcement.
Aldous expressed his concerns: “Some regions may see benefits, but overall this policy seems too broad and might lead to negative outcomes. There’s considerable concern. The Treasury ought to think about exceptions—for instance, if a home is part of a farm and can’t be used as a regular residence.”
“Following the budget announcement, I’ve heard from numerous constituents about their concerns with the reforms. It feels like when we had the ‘pasty tax’ and ‘static caravan tax’ issues in 2012,” he added.
Nigel Huddleston, the financial secretary to the Treasury, has informed Parliament that the government is dedicated to enforcing the new furnished holiday let regulations next April. He dismissed the idea for a consultation, emphasizing the government’s commitment to the reform.
Huddleston, having a close working relationship with Chancellor Jeremy Hunt, commented on the expected impact of the tax changes. Hunt believes these will help provide more homes for locals and discourage the trend of investing in short-term holiday lets, previously favoured due to their tax advantages.
Huddleston warned MPs of the complexities exemptions could introduce: “Looking for simplicity, if we start carving out exceptions, we open the door to more complexity and potential for gaming the system.”
“In some areas, favourable tax rates for holiday lets are encouraging too many to be converted to short-term rentals rather than long-term housing options, causing local issues,” Huddleston explained.
He also turned down the idea of a region-specific approach: “Tax policies can’t vary by individual areas; they must be consistent nationwide,” he stated. He reassured that the government recognizes the importance of holiday lets in tourism and clarified that after the reforms, significant tax deductions would still be available for landlords.
“For example, a landlord—who would be in a higher tax bracket—with mortgage interest costs of £12,000 would still see a £2,400 reduction in their income tax. Additionally, if they spend £8,000 on insurance, letting agents, and replacing domestic items, they could save another £3,200 in tax relief available to all landlords,” Huddleston explained.
“The goal is to create an equal playing field without incentivizing short-term over long-term lets due to tax benefits. That’s what we aim to correct,” he added.
Current estimates suggest that there are about 197,000 properties under the furnished holiday let scheme in the UK. However, less than half—49%—are available for holiday use, meaning that 76,000 are not used as regular residences due to planning restrictions.
