Hello, wonderful clients and friends,
Hold onto your hats (and your calculators), because there are some big changes on the horizon for those of you with Furnished Holiday Lets (FHLs). Starting from April 2025, it's not just the scenery that's shifting—your tax situation will too!
Mortgage Interest Tax Relief: The Countdown Begins ⏳ Right now, if you own a holiday let, you can wave a magic wand and make 100% of your mortgage interest vanish from your taxable income. Pretty nifty, right? Well, enjoy it while it lasts, because come April 2025, that particular party trick will disappear faster than ice cream on a sunny beach. Aligning with Section 24 rules, this change means no more deducting all that mortgage interest, which could particularly pinch those in higher tax brackets.
Strategic Moves Ahead 🚶♂️ What's a savvy investor to do? Well, we might see a trend where holiday let purchases shift to the realm of limited companies, similar to the buy-to-let market, as owners seek ways to soften the tax blow.
Pension Perks: A Changing Tide 🌊 Currently, your FHL rental income counts as Net Relevant Earnings, which means it can help you stash away money in your pension under more favourable tax conditions. Fast forward to 2025, and this won't be the case anymore. This change could have you rethinking how much you can contribute to your pension pot, making a review of your financial and retirement strategy more important than ever.
Capital Allowances: Last Call at the Tax Relief Bar 🍹 And here's a kicker: the generous ability to claim capital allowances on costs like swanky new sofas or that fancy fridge will also be packing its bags in 2025. Until then, every penny you put into capital items for your FHL reduces your taxable income. Post-2025? Not so much. So, if you're thinking about a refurb, now might be the time to get those plans rolling.
The Bottom Line 📉 Big changes are afoot, and they could shake up the sunny world of holiday letting. Whether you're a seasoned FHL owner or thinking about dipping your toes into these waters, it's crucial to stay informed and prepare for what these tax shifts mean for you. As always, our team is here to help navigate these choppy waters, ensuring you can keep sailing smoothly towards your financial goals.
Stay sunny, stay savvy, and let’s make sure your holiday lets keep making holiday magic, tax changes and all!
