The abolishment of the Furnished Holiday Letting (FHL) tax regime, which currently provides tax deductions for short-term rental owners, has led to a 1,300% year-on-year increase in Google searches for ‘furnished holiday let tax changes’.
The research, by holiday home insurance specialists Intasure, comes as owners query the possibility of increased costs once the tax relief ends from 6 April. The change was first announced in the 2024 spring budget and will impact an estimated 257,000 of homes in England registered as short-term lets.
From 6 April, property owners will no longer benefit from tax relief on capital expenditures such as furniture, reduced capital gains tax and tax relief on pension contributions. It means that as well as having to pay full price on items for their holiday let home any income generated from the FHL will no longer be counted as relevant earnings to contribute to their pension.
Intasure warns landlords planning to adapt the purpose of their property from a short-term holiday let to either a long-term let, private holiday home or main residence as a result of the abolishment, to remember to update their insurance policy to reflect such changes and to choose a policy tailored to the primary purpose of the home.
Potential capital loss
Andy Hale, holiday home specialist at Intasure, says: “Short-term holiday lets comprise a significant portion of UK properties, making it crucial for second homeowners to be aware of changes to the Furnished Holiday Let tax relief. This awareness is essential to help prepare for additional costs that may accompany its abolishment. Short-term let owners should seek professional advice to explore additional reliefs available to them and transition effectively.
“During this process, it’s essential to confirm that your current insurance on your second home fully covers you to protect against potential capital loss. Owners who rent out their second homes may need additional holiday let insurance alongside standard holiday home insurance. If the operation of your holiday let changes due to the abolishment of the FHL tax regime, it’s important to inform your insurer to ensure your home remains adequately covered.”
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