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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?
Michael Booth
15:04 PM, 5th March 2024, About 2 months ago
Another nail in the coffin.
Dave the Rave
9:32 AM, 6th March 2024, About 2 months ago
Two wrongs do not make a right.
I have both BTLs and a couple of FHLs. They are very different businesses, the only real similarity is a building. Section 24 Tax should be abolished for BTLs, making FHLs suffer equally is not a way forward. If anything, it might make it even more difficult for governments to row back.
GlanACC
11:23 AM, 6th March 2024, About 2 months ago
Reply to the comment left by Dave the Rave at 06/03/2024 - 09:32
So whats the difference between a furnished (long term) BTL which is not classed as a business and a furnished FHL (short term) which is classed as a business. Some kind of tax status / equalisation is needed
Dave the Rave
11:56 AM, 6th March 2024, About 2 months ago
Reply to the comment left by GlanACC at 06/03/2024 - 11:23
Hi GlanACC
Whilst on the face of it, the similarities are obvious, the runnning and occupation is very much different.
The Holiday Let business has massive void periods during low season, unless you are willing to operate at such a low rate as to not even cover wear and tear costs.
The ongoing presentation of the property requires heightened attention to detail and therefore frequent thorough gardening and window cleaning to keep the special impact for holidaymakers. Changeovers need to be expertly managed and swiftly handled, with very high laundry and cleaning costs. All bills are paid by the property owner and there are no extra charges for electricity etc... (at least not in mine).
The advertising and ongoing quoting for holidays and managing the holiday makers visit is also very much different. These services can be outsourced, but they are a distinguishing feature. There are differences in finance, insurance, fire regulations etc...
In short, it is a very hands-on operation and much more time consuming. High seasons can be great, low seasons very drawn out.
This is my experience, I can't speak for others.
JB
12:13 PM, 6th March 2024, About 2 months ago
Reply to the comment left by GlanACC at 06/03/2024 - 11:23
Longterm let landlords sit in their armchairs in their Stately home all day (when they're not shooting or fishing) while their servants polish their silver
Frank Jennings
12:15 PM, 6th March 2024, About 2 months ago
This is another good point. There is no real difference between a PRS LL and a FHL or even a Ltd company housing provider, except the taxes paid, and the tax reliefs available.
FHL's and Ltd companies get mortgage tax relief. They can deduct their expenses including mortgage interest payments before tax deductions. This means that they are taxed AFTER the expenses are paid that are necessary to run the business.
However the PRS LL does not have that benefit. After the introduction of Section 24, Landlords in the PRS have to pay tax on their total gross income, with no mortgage interest tax relief, except for a nominal 20% relief.
What this means that if you have properties as a PRS LL, that are heavily mortgaged, you will be paying more out in mortgage interest payments and tax then you are actually receiving in rent. I.e. You are running at a loss! No business can last running at a loss, except the banks, and the govenment.
So lots of the PRS LL's are selling up and investing elsewhere.
Section 24 only applies to PRS LL's. If it was applied to ANY other business they would very soon go bankrupt.
Section 24 is ridiculously unfair. It should be stopped immediately, before it kills the PRS entirely.
Jason Phillips
14:17 PM, 6th March 2024, About 2 months ago
The opposite has happened the the Valleys - in April 2023 the Welsh Government increased the number of nights 'let' from 72 to 184 in regard to council tax hoping they would earn (con) more money out of Holiday lets. Previously you could get council tax relief on a business rates rather than domestic rate, which is why air B&B was popular especially in rural areas. Nearly all the landlords have turned them into long term rentals. Subsequently the average rent in the Valleys has risen from £450 PCM (3 bed mid terrace) to £800 PCM as demand has outstripped supply. How can renters afford this hike? When politicians and council officers make these sound like they are great - they often make things worse in reality.
Jason Phillips
14:24 PM, 6th March 2024, About 2 months ago
Reply to the comment left by Frank Jennings at 06/03/2024 - 12:15
I agree, although this is already happening in Wales. We rented on average 20 properties per month pre-Section 24 and now we rent only 2 or 3 per month as most of my landlords have sold or are in the process of selling. Wait until England get the dreaded licencing reforms like we have called Rent Smart Wales. They are a law unto themselves making it almost impossible to rent out in Wales. You get fined £2,500 if you get caught renting a property out in Wales if you have not registered it and have a licence. Agents have had to pay £3,500 every 5 years to licenced and be strictly controlled by a company that cannot accept calls as they are not there for advice. NO WONDER THERE IS A HOUSING CRISIS IN WALES.
Neil Alphonso
9:50 AM, 9th March 2024, About 2 months ago
Reply to the comment left by Cider Drinker at 04/03/2024 - 09:45
Unfortunately two wrongs do not make a 'right'. What happened in the PRS sector with S24 was plain and simple: wrong.
With holiday lets it is even worst. Holiday lets are not the same as PRS in any way - this is a hospitality business and has very different paremeters and rules. But fundementally 'it is a business' and should be treated as such. I feel very sorry for all the BnB's across the country run by families as their only source of income and providing a valuable service. Most of them are not set up as companies.
Everyone should be protesting that if the govt keeps killing business in order to service their own agenda then they will just cause bigger problems for themselves and society and ultimately fail. Sadly that is a long game.
moneymanager
10:12 AM, 9th March 2024, About 2 months ago
Dan Wilson Craw confuses a 'tax relief' with a legitimate business cost.