After the government recently announced the abolition of the furnished holiday letting (FHL) tax regime, Zeal has provided its top five tips for holiday let owners to consider now.
For a recap of the policy announced on 29 July, click here to read Zeal's article on the new rules and key implications. With the proposed new legislation scheduled to be implemented in April 2025 (2025/26 tax year), time is of the essence.
1. Claim all available capital allowances before the deadline
Most holiday let owners would have claimed capital allowances on the furniture and furnishings when they first set up the holiday let property. However, capital allowance tax relief claims are often missed on the purchase price of the building or the original construction and refurbishment costs. This is because it is not an area of tax covered by general accountants.
Identifying unclaimed capital allowances will save you thousands of pounds in tax. To ensure no claim is missed before the tax regime ends, Zeal is offering Holiday Cottage Handbook subscribers a free capital allowances reviews. Click here to book yours.
2. 10% CGT rate – you can have three years to sell your property
Business Asset Disposal Relief (BADR) allows gains on the sale of qualifying furnished holiday lets to be taxed at only 10%. After April 2025, gains will be taxed at 18%-24% (based on current capital gains tax (CGT) rates). To be able to claim BADR, the business must cease on or before 5 April 2025. You will still have three years to sell the properties and qualify for BADR.
3. Review your business structure
Limited companies will not be impacted by the restriction for finance cost deductions from April 2025. Restructuring the ownership of your properties to a limited company can reduce annual tax liabilities and reduce future CGT charges. It can also create inheritance tax planning opportunities. Tax charges on transferring property to a limited company, such as CGT and stamp duty are less likely to be applicable before April 2025.
4. Avoid being taxed equally on profits by using a Declaration of Trust
From tax year 2025/26, joint owners of holiday let properties will have to be taxed on 50% of the profits of the holiday let. Previously, it was possible to allocate 100% of the profits to one owner. By creating a Declaration of Trust, the profits from the property can be shared in a proportion you choose. For example, 90% to Mrs A & 10% to Mr A. The Declaration of Trust is submitted to HMRC on Form 17 and remains in place until it’s replaced.
5. Review pension position and maximise contributions
From April 2025, FHL income will no longer count as relevant earnings for pension contributions. Review your recent contributions and maximise your annual allowances before the rules change.
Zeal are chartered tax advisors and capital allowances specialists. Their team of experts can help guide you through the tax changes and explore ways to mitigate their impact. If you have any questions or would like to arrange a free capital allowances review, contact Zeal today.
Call: 01633 287898
Email: hello@gozeal.co.uk
Komentarze