Changes to Alternative financing tax rules

Newsletter issue – April 2025

The furnished holiday lettings tax regime is on the verge of being abolished.

Reforms were announced under the previous Conservative Government in Spring 2024 and are now set to take effect. The changes will come into force firstly for Corporation Tax and for Corporation Tax on chargeable gains from 1 April 2025. And then for Income Tax and for Capital Gains Tax on or after 6 April 2025.

Currently, the tax break makes it more profitable for second homeowners to let out their properties to holiday makers rather than to residential tenants to rent, raising concerns over the availability of long-term rental housing for local people. Multiple Dwellings Relief is also being abolished.

Beneficial tax treatment includes exemption from rules which restrict loan interest to the basic rate of Income Tax for other landlords. The capital allowances rules are also more beneficial. The changes will primarily affect any individual, corporation or trust who run or sell holiday lettings. The Government said the change 'promotes fairness and aligns the tax rules for furnished holiday lettings with those for other property businesses.'

• The Taxation of Chargeable Gains Act (TCGA) 1992
• Income Tax Act (ITA) 2007
• The Corporation Tax Act (CTA) 2009