Tax and regulation changes all landlords need to know

Incoming changes, including the abolition of tax breaks for furnished holiday lets, the end of Multiple Dwellings Relief, changes to Capital Gains Tax will all impact landlords.

This article delves into the details of these changes, exploring how they are set to reshape the landscape for property owners and the implications for the housing market at large.

End of tax breaks for furnished holiday lets 

The end of tax breaks for properties rented out as short-term furnished holiday accommodation will be brought in from April 2025.

Introduced in the 1980s, the Furnished Holiday Lettings (FHL) scheme provided tax advantages to landlords who let short-term furnished holiday properties compared to those who rent residential properties to longer-term tenants.

The FHL scheme is to be abolished from 6th April 2025, which means short-term and long-term lets will be treated the same for tax purposes.

The changes are as a result of the housing crisis and concerns that the amount of holiday lets, driven by services like Airbnb, is making it harder for local people to access long term housing in popular tourist areas like Devon, Cornwall and the Lake District.

Among the changes that landlords will see due to the ending of the FHL scheme are:

• interest and finance costs will be restricted to 20% basic rate relief
• business asset Capital Gains Tax reliefs will not be available on the sale of the property

Wealth planning firm Quilter said holiday home owners could lose an average of £2,835 a year, based on a £350,000 property purchase price, a 4.5% annual mortgage rate and £20,000 rental income. 

Caroline Miskin, Senior Technical Manager at the ICAEW Tax Faculty, said: “It will be interesting to see whether this change does actually encourage landlords to move to longer term lets. The change appears to be a simplification of the tax system but could result in disputes and tribunal cases over whether a lettings business constitutes a trade.” 

Find out more on what the abolition of the FHL scheme means for you.

Property tax charges

Property tax is devolved in the UK, and is therefore different in England, Scotland, Wales and Northern Ireland.

• England – Stamp Duty Land Tax (SDLT)
• Scotland - Land and Building Transaction Tax (LBTT)
• Wales - Land Transaction Tax (LTT)
• Northern Ireland - Stamp Duty Land Tax (SDLT)

Some changes came into effect from December 2024, and other are set to take place from April 2025. If you are looking to purchase a property to let out, you must be aware of what rates will be applicable to you and in particular the impact of additional surcharges where this property will not be your main home.

Making Tax Digital for landlords

Making Tax Digital (MTD) for landlords and sole traders will come into effect from April 2026, and your level of turnover will determine when you need to comply.

• April 2026 - landlords and sole traders with turnover of £50,000 or more
• April 2027 - landlords and sole traders with turnover of £30,000 or more

There after, MTD will likely be rolled out to those with income above £20,000, but a date is yet to be confirmed.

What will landlords need to do?

1. Use MTD compatible software
2. Send quarterly updates to HMRC
3. Send a Final Declaration to HMRC by 31st January

Points to note

• Landlords with multiple properties can report all their income together in one report.
• Landlords with overseas properties will need to report this income, and it will be reported separately to UK properties.
• Landlords with jointly owned properties will use their own share of income to determine when they must meet MTD requirements.

Clampdown on ‘rogue’ business rates agents 

Alongside the Spring Budget, the Government published responses to its business rates avoidance and evasion consultation. 

It said that many respondents reported being aware of “rogue” business rates agents who take advantage of business owners’ lack of understanding about the business rates system by publicising avoidance or evasion schemes and locking firms into long, unfavourable contracts. 

In response, the Government said it will improve communications to ratepayers, particularly small business owners, so they can make a more informed decision when selecting a business rates agent.  

Commitment to build over a million homes 

The Government announced at the Autumn Budget an investment of £5bn in 2025 towards the target of building 1.5 million new homes over the next five years, and a £500 million boost to the Affordable Homes Programme with sites planned for Liverpool Central Docks.

Get in touch   

Let TaxAssist Accountants take the hassle out of your property finances, so you can focus on managing your property. Call us today on 0800 0523 555 or use our online enquiry form.

Last updated: 31st January 2025