Operators of Airbnbs will no longer have tax advantages over individual landlords letting out buy-to-let properties, as the Chancellor has opted to get rid of the Furnished Holiday Lets regime.
The move will take effect from April 2025, while anti-forestalling rules will be introduced to prevent unconditional contracts being used to secure certain tax benefits in the interim.
Hunt said: “I am concerned that this tax regime is creating a distortion meaning that there are not enough properties available for long-term rental by local people.
“So to make the tax system work better for local communities, I am going to abolish the Furnished Holiday Lettings regime.”
There’s long been concerns that the current situation is eroding the identity of communities which attracts lots of tourism, like the Lake District.
Rebecca Wilkinson, property and construction sector specialist and business tax partner at Menzies LLP, a UK business advisory and accountancy firm, said: “The biggest headline grabbing announcement from the Spring Budget as far as the property sector is concerned is the scrapping of the Furnished Holiday Lettings (FHL) regime. The FHL regime has been around for years and provides individuals and companies who hire out furnished properties as holiday lets with various tax advantages.
“In recent years the number of landlords providing furnished holiday homes has increased significantly. This has partly been triggered by the Section 24 interest restriction rules which prevent private landlords from obtaining full tax relief for their mortgage interest. Whilst residential tenancies are caught by the Section 24 interest restrictions rules, the provision of FHLs is not and this business model has therefore become far more attractive from a tax efficiency perspective.
“The rise of AirBnB has also made it a lot easier for landlords to market their properties as holiday lets and since Covid the demand for UK holiday accommodation has increased. For many landlords this has made the switch in business model an attractive option.
“The problem is that converting properties to holiday lets is reducing housing stock and is pricing the residents of some popular tourist destinations out of the market. The Government believes that scrapping the FHL regime will “make the property tax system fairer and more efficient” and will “level the playing field between short-term and long-term lets and support people to live in their local area”.
Andrew Noton and Phil Blackburn, partners at chartered accountants and business advisers Lubbock Fine, said: “Abolishing the Furnished Holiday Lets regime is also a step in the direction of encouraging buy to let landlords to sell up.
“Holiday lets have become more popular in the last 10 years through the rise of platforms like Airbnb but increases in numbers of such properties have often been at the expense of local residents being able to afford to step onto the property ladder.”
Liam Monaghan from Prime London buying and investment agency, London Central Portfolio, is pleased with the move.
He said: “Aligning the market for owners who benefit from holiday-let tax breaks will act as a positive for the long-let market, as currently, tenants are effectively losing out on homes to tourists. It is currently more tax efficient for an owner to rent out their properties on short-let platforms such as Airbnb. In areas with a high level of tourism, like London, it has meant that more properties have been made available for these types of lets and therefore removing them from the general long-let market.
“The proposed changed should encourage these investors to return to the long-let market, therefore increasing the supply which is desperately needed. There is clearly a huge demand for long let rental properties from tenants, as rents are rising well in advance of inflation. Tenants are also offering landlords rents a year in advance in order to secure a property over somebody else.”
