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Home | News | Budget 2024

Chancellor’s easy target will squeeze landlords but also hit Britain’s vital tourism industry

The Chancellor has dealt another blow to landlords by scrapping the Furnished Holiday Lettings (FHL) regime.

From April 2025, landlords will no longer be able to claim full mortgage interest relief, benefit from lower capital gains tax relief (CGT), or receive allowances for furnishing and renovations.

The Treasury says it’s to free up housing stock in coastal and tourism hotspots for

residential rentals, although no mention was made of filling empty homes, of which there are an estimated 1.4 million in England alone.

The impact will vary depending on each owner’s situation. Many won’t see much difference—if there’s no mortgage, for instance. Plus, relief can still be claimed against running costs, such as utility bills and agents’ fees. The most affected are likely to be owners with multiple properties, have high incomes, or pay high mortgage rates.



The current tax regime stays in place for the current tax year (until 5 April 2025).


Tax relief on furnishing or renovating FHLs will be scrapped, as properties are expected to be reclassified for tax purposes.


Upon sale, the lower rate of CGT will no longer apply.



Although the changes won’t apply until next year, the government has yet to outline what this means for FHLs’ VAT status.


At the end of the tax year, it’s unclear what happens to accrued losses or allowances. Will they carry over?

Source: Zeal Chartered Tax Advisers

(Click here to read more)

Landlords were all but encouraged into the holiday let market after the clampdown on buy-to-let mortgages to free up homes. But since then, owners have endured CGT rises, a loss of mortgage interest relief, higher stamp duty, and the loss of Private Residence Relief. Even landlords who now decide to sell will pay more CGT from next year.

Plus, when the buy-to-let clampdown came in, the net effect was that the number of homes in the rental sector dropped, forcing up rents.

The targeted squeeze is being viewed in the property rental and tourism industries as a cynical pre-election push to shrink the yawning gap in the polls which put Labour comfortably ahead of the Conservatives.

Tourism chiefs are also deeply concerned about the impact on what is one of Britain’s only growing major industries. The Professional Association of Self-Caterers UK (PASC UK) estimates that the rural and coastal holiday cottages sector contributes £6 billion a year in England alone. The risk is the Chancellor’s move will put thousands of jobs at risk in hard-pressed rural and coastal communities.

Homelessness charities, too, say the Budget does nothing to address the real problems of the housing shortage, namely creating affordable housing, better (cheaper) access to mortgages, and loosening byzantine planning regulations.


Of course, there will be owners who exit the holiday let market. But it’s currently a saturated market that’s been super-charged since the pandemic. A reduction (or normalisation) of the number of FHLs should yield higher occupancy rates and better nightly rates. Staycations remain attractive to UK holidaymakers as overseas travel stays stubbornly expensive for many (the Chancellor’s also targeting them with an increase in Air Passenger Duty).

As for property prices, we expect a short-term dip if there’s a sudden surge in homes for sale. But with inflation predicted to fall in the next few months, and the Bank of England expecting to start cutting interest rates before the year’s end, property prices should recover.

Despite that, we know that you’ll want to scrutinise how the changes (as they’re revealed) will affect you and your property. At this stage, there doesn’t seem to be much cause for alarm, but rest assured, we’re watching this closely. We’ll keep you updated on the changes with expert analysis.

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