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10:05 AM, 4th March 2024, About 2 months ago 34
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Chancellor Jeremy Hunt is expected to announce a £300 million tax crackdown on second-home owners who rent out their properties to tourists in the Budget, The Sunday Times reports.
He will scrap a series of tax breaks for landlords who use the furnished holiday lets (FHL) regime, which allows them to deduct the full cost of their mortgage interest payments from their rental income and pay lower capital gains tax when they sell.
Mr Hunt will claim that ending the FHL regime will help ease the housing crisis in popular destinations such as Cornwall and the Lake District, where local people struggle to find affordable homes as landlords convert to holiday lets to take advantage of the tax benefits.
The move is also part of the Chancellor’s bid to find the money to cut personal taxes by 2p, a pledge made by Prime Minister Rishi Sunak during the election campaign.
A source close to Mr Hunt said: “1p is affordable, 2p isn’t. We’re trying to make it, but we don’t know whether we can.”
The £300 million from scrapping the FHL regime will be added to the £500 million a year that Mr Hunt expects to raise from a new tax on vaping products.
The FHL regime requires landlords to make their properties available for at least 210 days a year and rent them out for at least 105 days a year, with each booking limited to 31 days.
According to TaxWatch, a think tank, a landlord earning £30,000 a year in rent from a property under the FHL regime can save £4,000 a year in income tax compared with a normal long-term let.
They can also reduce their capital gains tax bill by tens of thousands of pounds when they sell.
About 127,000 properties in the UK are registered under the FHL regime and Mr Hunt hopes that abolishing it will persuade landlords to sell or switch to long-term rentals, increasing the supply of housing for residents.
Ben Beadle, the chief executive of the National Residential Landlords Association, said: “The Chancellor needs to address the chronic shortage of long-term rentals by attracting new landlords to the market.
“Squeezing holiday lets is not the answer. He should follow the advice of the Institute for Fiscal Studies and reverse punitive tax hikes which have stifled the supply of the homes renters desperately need.”
He added: “Scrapping the stamp duty levy on the purchase of additional homes would see almost 900,000 new long-term homes to rent made available over the next 10 years.
“This would lead to a £10 billion boost to Treasury revenue as a result of increased income and corporation tax receipts.”
Dan Wilson Craw, the deputy chief executive of Generation Rent, said: “When the government cut tax relief for landlords to give first-time buyers a boost, they failed to do the same for holiday lets.
“That means that in Britain’s holiday hotspots, first-time buyers have been getting outbid not by landlords, but holiday let operators, while tenants have lost out to tourists.”
He adds: “The shortage of homes to live in has driven people away from the areas they grew up in.
“That’s why Generation Rent and thousands of our supporters, including renters who have been evicted to make way for holiday lets, have been campaigning for these tax perks to be scrapped.
“A fairer tax system for holiday homes would be a very positive step for the government to take, and we look forward to hearing more in the Budget.”
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The landlord vote - who gets it?
Frank Jennings
13:16 PM, 4th March 2024, About 2 months ago
Reply to the comment left by GlanACC at 04/03/2024 - 11:53
Yes, this is correct. A small PRS LL with one or two properties, will not be able to incorporate without paying a massive GCT bill. For a PRS LL to incorporate, he will have a massive CGT bill to pay, because they will "selling" their properties to their new Ltd. Company, and HMRC will see that as making a personal capital gain and subject to a big CGT bill.
However if they instead go from a PRS LL to a LLP, then as I understand it, they will not have to pay the CGT bill they would otherwise have to pay. Then after 3 years of being a LLP, they can then incorporate and obtain the incorporation relief. Please correct me if I'm wrong about this, as I'm no expert!
If a PRS LL has at least 10 tennants/properties and they can show HMRC that they spend over 20 hours a week in time tending to these properties, then under rule 162, (as I understand it) a PRS LL can directly incorporate and get incorporation relief and the CGT bill will be moved over and divided between the shares in the new company, and will be payable only when those shares are sold/liquidated.
Please contact property118 if you want the details, as they can help you with this process, and advise you best.
Cider Drinker
17:29 PM, 4th March 2024, About 2 months ago
Reply to the comment left by anthony altman at 04/03/2024 - 12:07
It is a fact that FHLs get substantially better tax treatment than the PRS. It is the primary reason that many PRS properties have been switched to FHLs.
Anybody that fights for tenants should be fighting for lower costs for landlords.
Arthur Oxford
18:17 PM, 4th March 2024, About 2 months ago
The whole premis that this further errosion of tax rights for small business owners is going to make these holiday homes/FHLs availble to buy for locals is utterly crass.
The whole issue is that property prices are just way too high for youngsters or locals in these areas to buy. Full stop. Even if there is some small correction in house prices (no government wants to crash house prices and lose votes) it won't make any difference to their relative affordability for "locals".
Having been a private landlord, providing homes to around 15 people, for over twenty years, what this government, the Liberals and Labour have done and want to do to the PRS is all counter-intuitive click-bait to try and win votes and has just hurt the sector, which, let us not forget, provides a roof over the heads of at least 10 million people in this country.
Due to the hammering we have taken, I thought I might at least be able to utilise one of my properties as FHL and was just in the process of changing over, but the bloody rug has been pulled again. The house is in a small village, a three bed, which is worth £400k. No "local" or first time buyer can afford to buy it, so who is it going to go to? A commuter who wants to move further out of London probably, or a BTL Company. It won't be a "new" home on the market.
I really despair about the whole situation. My properties are better than my own (my wife tells me) and I have lovely long-term tenants who are paying slightly less than the going rate, but the situation is becoming untenable and they are all £350k plus, so well out of the range of most. Reform have my vote as the Conservatives have sailed us down the river and Lobour and the Liberals just want to smash all those who have worked hard and gone without in order to be self-sufficient in their old age. I have never taken a penny from the state in all my years and am just getting eff'd over for my entrepreneurship while providing good homes for people.
GlanACC
18:47 PM, 4th March 2024, About 2 months ago
Reply to the comment left by Arthur Oxford at 04/03/2024 - 18:17
I had 18 properties, 12 sold and looks like I am keeping the rest. S24 never bothered me as I had paid off all the mortgages by the time it came in and due to other businesses I was able to 'engineer it' so that profits on the 2 properties in my partnership went to the wife. Apart from my pension I now live off my dividends on which only around 9% tax is paid. I have never moved into the 40% tax bracket as any surplus profit was paid into a private pension. You just have to play the game the best you can.
Working forHMRC
19:30 PM, 4th March 2024, About 2 months ago
Looks likely single holiday home owners will lose business rate relief (if BR Reg), use of rent as pensionable earnings, and poss section 24 applied.
What impact will the changes be on multiple holiday/serviced operators?...
TrevL
22:55 PM, 4th March 2024, About 2 months ago
Reply to the comment left by GlanACC at 04/03/2024 - 18:47
Hi GlanACC,
Would be interste dto know how the income from the properties are going into you rprivate pension?
Is it that you are taking a salary from you company alongside the dividends?
Landlord 123
7:10 AM, 5th March 2024, About 2 months ago
Perhaps the government should be looking into companies like Black Rock who have bought over 4 Billion pounds worth of properties in the last 4 yrs. Buying up whole estates how much tax do they contribute to the economy!
GlanACC
7:25 AM, 5th March 2024, About 2 months ago
Reply to the comment left by TrevL at 04/03/2024 - 22:55
Yup, paid a salary and dividends, also company does other business apart from property
SGC
9:58 AM, 5th March 2024, About 2 months ago
Reply to the comment left by Cider Drinker at 04/03/2024 - 09:45
Only Ltd. companies don't actually have an advantage as have to pay 25% Corporation tax and then full amount on any earnings after this !
GlanACC
10:10 AM, 5th March 2024, About 2 months ago
Reply to the comment left by SGC at 05/03/2024 - 09:58
19% if you make a profit of less than £50,000 and its quite easy to engineer that