Government urged to scrap holiday let tax breaks by advisor

Government urged to scrap holiday let tax breaks by advisor

11:28 AM, 3rd November 2022, About 2 years ago 16

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A government adviser is urging the scrapping of tax perks for holiday lets which could see tax bills increasing by thousands of pounds every year for landlords.

The Office for Tax Simplification (OTS) is recommending that the government stops the owners of a furnished holiday let from offsetting mortgage interest payments against their income tax bills.

The ending of the so-called ‘furnished holiday let system’ would then bring to an end one of the last tax-efficient forms for small-scale property investment.

It would also force the owners of holiday lets to pay tax on their earnings in the same way that a traditional BTL landlord does.

Buy to let landlords had, until 2017, the same perk but this was phased out and then replaced with the 20% tax credit in 2020.

However, holiday let landlords kept the relief.

Forking out an extra £2,000 every year in tax

One accountancy firm has calculated that a landlord in Cornwall renting out a four-bedroom house as a holiday let will be forking out an extra £2,000 every year in tax.

Accountancy firm RSM says that a landlord with a holiday let who earns £24,000 every year, will have an income tax bill of £5,775 – assuming that the property is jointly owned by a couple who are also higher rate taxpayers

If the government decides to follow the OTS advice and scraps the furnished holiday let system, the owners of the holiday let would see their tax bill rising to £7,687.

‘Properties will become commercially unviable’

Chris Etherington, of RSM, told the Daily Telegraph: “If they get rid of that benefit, the ultimate result is that people will sell up because their properties will become commercially unviable.”

In a report, the OTS says there are around 127,000 furnished holiday lets owned by individuals with the income being declared on their HMRC personal tax returns.

The organisation says that short-term rentals enjoy a more favourable tax treatment than the main property income tax rules with more tax relief available for costs, including interest.

There’s also, potentially, a reduced capital gains tax bill when the property is sold.

Now, the OTS recommends that the government considers whether there is a benefit in having a separate tax regime for furnished holiday lets and if the rules are abolished there will be a need to determine whether some property letting activities that are subject to income tax should be treated as trading activities.


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Comments

Beaver

16:20 PM, 3rd November 2022, About 2 years ago

Reply to the comment left by Rerktyne at 03/11/2022 - 15:35
Whilst I don't know your circumstances I'm guessing that the difference between you and Mr. Centerparcs is that Mr. Centerparcs is incorporated...

...oh and I think the ownership of Centerparcs is European and I'm not sure what proportion of their taxes they pay in each country in which they operate.

NewYorkie

17:22 PM, 3rd November 2022, About 2 years ago

Reply to the comment left by Beaver at 03/11/2022 - 16:16
Everyone has a different outlook. Yes, quite a few will have sold their BTLs to a Ltd company, and accepted the hit where CGT was due, but I believe most of those Ltd companies with 3.3 BTLs will have been set up specifically to buy properties from within that wrapper and not from personal holdings.

Rerktyne

3:52 AM, 5th November 2022, About 2 years ago

The principle is the same: two businesses which accommodate holidaymakers. Whether it’s Centre Parcs or “Apple Crumble Land” is irrelevant!

Martin Thomas

20:51 PM, 5th November 2022, About 2 years ago

Reply to the comment left by NewYorkie at 03/11/2022 - 14:29
10% tax to the Portuguese Treasury, presumably. And a loss of tax revenue to the British Exchequer.
Mark Alexander can confirm,
Priceless!

NewYorkie

10:54 AM, 6th November 2022, About 2 years ago

Reply to the comment left by Martin Thomas at 05/11/2022 - 20:51
Anyone receiving the benefits of living in Portugal, or any other country, should pay their taxes. If not living in the UK, why should they pay their taxes there? Why, after paying significant [way over the average] sums in taxation for 40+ years, and constantly faced with demands for yet more, even after retirement, should anyone pay the UK's disgraceful taxes when not receiving any benefit?

anthony altman

18:47 PM, 19th April 2023, About A year ago

It always amazes me that when I think they couldn't sink lower these individuals vomit out more slime
BTL landlords are taxed on turnover not profit every other business is taxed on profit
Clear discrimination and injustice
So now these vicious gangsters wish to pick on another minority to be victims of their insatiable greed
Of course these grasping parasites pick on the little people while being generously rewarded by big business for making sure they pay hardly any tax

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