Autumn Budget 2024 Business Rates and Holiday Let Changes
Published / Last Updated on 07/11/2024
Abolition of Furnished Holiday Let (FHL) Tax Breaks
This was already put forward by the then Conservative government earlier this year and is now confirmed in the new Labour government’s Budget.
Special tax treatment and reporting for income and gains from FHLs will disappear from 6th April 2025 and FHLs will now be treated in the same way as any other investment property or buy to let (BTL) property.
Income and gains from UK property will be dealt with under normal property income and gains. This means:
- Finance/mortgage/loan interest costs will only be allowed to be offset at basic rate income tax in the same way as BTLs.
- There will be no access to tax breaks under business property relief and business rollover relief for FHLs as they will no longer be classed as a ‘business’ asset.
- If FHLs are no longer business assets, any income cannot be counted towards your maximum pension contribution i.e., not considered as relevant earnings.
- Capital allowances for improvements or replacing domestic items will no longer be allowed and may need to be recorded instead to offset against capital gains tax on sale/disposal (as per BTLs).
Initial Thoughts FHLs
- If you were using your holiday let income as relevant earnings to make pension contributions, you need to revisit this.
- A big question that may come up soon is whether local authorities (if there was a change in stance) and permission given by the Valuations Office Agency to allow local authorities to charge Council Tax (as FHLs are no longer business assets) where many FHLs are currently subject to Business Rates and may pay nothing under Small Business Rates Relief.
- Double council tax on 2nd homes from April 2025 in already on its way, will this mean holiday lets too at some point in the future? We suggest you need to make sure you are going to need to achieve the minimum 182 days ‘holiday’ rented out target at least to even have a chance of continued qualification for business rates.
Other News on Business Rates:
- Removing charitable rate relief from private schools.
- Business rate reform:
- Discussion paper issued for reform and overhaul of the business rating system with the Valuation Office Agency (VOA) publishing a response to the March 2023 paper for Consultation on Disclosure to deliver a transparent business rates decision.
- Multipliers (the amount the rateable value is multiplied by to get the business rates due):
- Small business multiplier in England frozen at 49.9p with legislation to freeze this ongoing.
- Standard multiplier will be uprated by the September 2024 CPI rate to 55.5p.
- Retail, hospitality, and leisure relief:
- 2025-26, eligible retail, hospitality, and leisure (RHL) properties in England will receive 40% relief on business rates with support up to a cash cap of £110,000 per business.
- Lower multipliers to be introduced permanently to RHL properties with higher multipliers for business property with rateable values above £500,000.
Initial Thoughts on Business Rates in General:
- Expect business rate increases and small businesses that previously enjoyed small business rate relief (paying no rates) to start paying rates again.
- This is just another tax on businesses (paid to local authority who pass it on to central government) as many businesses get nothing directly from the local authority and even must pay for commercial waste collection. That said, business rates also contribute to road repairs, street lighting and emergency services such as fire, police, ambulance services via central government then paying those same business rates back to contribute to the aforementioned services.
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