Abolition of FHL Rules - Opportunities and Strategies

December 2024

FHL tax

 

The Impact of the Abolished Furnished Holiday Lettings (FHL) Tax Regime

The Furnished Holiday Lettings (FHL) tax regime once provided significant financial incentives for landlords operating short-term rental properties, offering benefits such as favourable income tax treatment, access to capital gains tax reliefs, and the ability to offset certain costs against rental income. However, the abolition of the FHL regime has had widespread implications for landlords, the rental market, and the broader economy.

1. Loss of Tax Reliefs and Increased Financial Burden
One of the most immediate effects of the abolished FHL regime is the loss of tax reliefs previously available to property owners. Under FHL rules, landlords could claim capital allowances for items like furniture, fixtures, and equipment used in their holiday lets. This benefit reduced taxable profits and made it more financially viable to maintain high-quality accommodations. With the removal of these allowances, some landlords may face increased tax liabilities, putting pressure on their profitability.

2. Challenges in Sustaining Quality Standards
The FHL regime incentivised landlords to maintain a higher standard of property quality to attract guests and meet occupancy requirements. Without these tax benefits, some property owners may struggle to invest in refurbishments or upgrades, potentially leading to a decline in the standard of their short-term rental properties. This leaves an opportunity for those landlords who continue to reinvest in their accommodation to have a competitive advantage.

3. Impact on Market Dynamics
The removal of FHL tax benefits has also shifted market dynamics. Some landlords have exited the short-term letting market entirely, finding the reduced financial incentives insufficient to justify the complexities of managing holiday lets. Some landlords have transitioned their properties to long-term residential rentals. Overall, this is likely to lead to a decrease in the supply of short-term rentals, which can drive up prices for landlords that stay in the market and reduce accommodation options for holiday visitors therefore increasing occupancy in properties still running as holiday accommodation.

4. Adaptation by Landlords
Despite these challenges, many landlords have sought ways to adapt to the new tax landscape. Some have turned to professional agents or property management companies to optimise operations and maximise returns. Others have restructured their businesses, leveraging new technologies to improve marketing, streamline bookings, and attract higher-paying guests.

5. Calls for Policy Revisions
The abolition of the FHL regime has sparked debate about the role of government policy in supporting the short-term rental market. Industry stakeholders have called for alternative measures to balance the needs of landlords, tourists, and local communities. Suggestions include targeted tax incentives for eco-friendly or high-standard properties or grants to support property upgrades in tourism-dependent regions.

Conclusion
The abolition of the Furnished Holiday Lettings tax regime will reshape the landscape of short-term property rentals, creating challenges for landlords and impacting the tourism sector. While the long-term effects are still unfolding, the shift highlights the need for adaptability within the rental market and balanced policymaking to support sustainable growth in the industry. Staying informed about evolving regulations and exploring new strategies for managing properties will be crucial for landlords in navigating this transformed environment and should leave to an overall competitive advantage for those that do.

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Bournecoast Property Agents offer a trusted holiday lettings service to landlords. We currently manage hundreds of properties, each of which is administered according to the landlord's specific needs, whether they are seeking a premium income through holiday and winter lets, or a greater degree of security provided through long term lets. Our landlords also benefit from a range of the following services and benefits.

  • 3rd generation family business providing quality accommodation for over 60 years in Bournemouth, Poole, Christchurch and the surrounding areas.
  • A true commitment to our landlords, some of whom have been registered with since when the Directors’ grandfather was running the company.
  • National advertising, through features, national publications and Social Media campaigns.  
  • A marketing team who work tirelessly on developing marketing campaigns to generate more holiday bookings for our clients.
  • Bournemouth, Christchurch & Poole Tourism membership and advertising through the local Destination Tourism Associations.
  • A dedicated customer service department and out of hours service for all managed properties.
  • We have a large database of existing clients that book with us year after year.
  • The option to have linen and towels provided at the property at no additional cost to yourself.
  • External portal website advertising (airbnb - booking.com - vrbo).
  • Dedicated staff each with a significant role to play in the managing of your property, through the summer and winter periods.

Click here to read reviews about the Bournecoast services.  If you need further support, please telephone our friendly team on 01202 437 888 or contact them here.

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