Chancellor targets holiday lets in £300m tax crackdown

Another nail in the coffin.

Two wrongs do not make a right.

I have both BTLs and a couple of FHLs. They are very different businesses, the only real similarity is a building. Section 24 Tax should be abolished for BTLs, making FHLs suffer equally is not a way forward. If anything, it might make it even more difficult for governments to row back.

Reply to the comment left by Dave the Rave at 06/03/2024 - 09:32
So whats the difference between a furnished (long term) BTL which is not classed as a business and a furnished FHL (short term) which is classed as a business. Some kind of tax status / equalisation is needed

Reply to the comment left by GlanACC at 06/03/2024 - 11:23
Hi GlanACC

Whilst on the face of it, the similarities are obvious, the runnning and occupation is very much different.

The Holiday Let business has massive void periods during low season, unless you are willing to operate at such a low rate as to not even cover wear and tear costs.

The ongoing presentation of the property requires heightened attention to detail and therefore frequent thorough gardening and window cleaning to keep the special impact for holidaymakers. Changeovers need to be expertly managed and swiftly handled, with very high laundry and cleaning costs. All bills are paid by the property owner and there are no extra charges for electricity etc... (at least not in mine).

The advertising and ongoing quoting for holidays and managing the holiday makers visit is also very much different. These services can be outsourced, but they are a distinguishing feature. There are differences in finance, insurance, fire regulations etc...

In short, it is a very hands-on operation and much more time consuming. High seasons can be great, low seasons very drawn out.

This is my experience, I can't speak for others.

Reply to the comment left by GlanACC at 06/03/2024 - 11:23
Longterm let landlords sit in their armchairs in their Stately home all day (when they're not shooting or fishing) while their servants polish their silver

This is another good point. There is no real difference between a PRS LL and a FHL or even a Ltd company housing provider, except the taxes paid, and the tax reliefs available.
FHL's and Ltd companies get mortgage tax relief. They can deduct their expenses including mortgage interest payments before tax deductions. This means that they are taxed AFTER the expenses are paid that are necessary to run the business.
However the PRS LL does not have that benefit. After the introduction of Section 24, Landlords in the PRS have to pay tax on their total gross income, with no mortgage interest tax relief, except for a nominal 20% relief.
What this means that if you have properties as a PRS LL, that are heavily mortgaged, you will be paying more out in mortgage interest payments and tax then you are actually receiving in rent. I.e. You are running at a loss! No business can last running at a loss, except the banks, and the govenment.
So lots of the PRS LL's are selling up and investing elsewhere.
Section 24 only applies to PRS LL's. If it was applied to ANY other business they would very soon go bankrupt.
Section 24 is ridiculously unfair. It should be stopped immediately, before it kills the PRS entirely.

The opposite has happened the the Valleys - in April 2023 the Welsh Government increased the number of nights 'let' from 72 to 184 in regard to council tax hoping they would earn (con) more money out of Holiday lets. Previously you could get council tax relief on a business rates rather than domestic rate, which is why air B&B was popular especially in rural areas. Nearly all the landlords have turned them into long term rentals. Subsequently the average rent in the Valleys has risen from £450 PCM (3 bed mid terrace) to £800 PCM as demand has outstripped supply. How can renters afford this hike? When politicians and council officers make these sound like they are great - they often make things worse in reality.

Reply to the comment left by Frank Jennings at 06/03/2024 - 12:15
I agree, although this is already happening in Wales. We rented on average 20 properties per month pre-Section 24 and now we rent only 2 or 3 per month as most of my landlords have sold or are in the process of selling. Wait until England get the dreaded licencing reforms like we have called Rent Smart Wales. They are a law unto themselves making it almost impossible to rent out in Wales. You get fined £2,500 if you get caught renting a property out in Wales if you have not registered it and have a licence. Agents have had to pay £3,500 every 5 years to licenced and be strictly controlled by a company that cannot accept calls as they are not there for advice. NO WONDER THERE IS A HOUSING CRISIS IN WALES.

Reply to the comment left by Cider Drinker at 04/03/2024 - 09:45
Unfortunately two wrongs do not make a 'right'. What happened in the PRS sector with S24 was plain and simple: wrong.
With holiday lets it is even worst. Holiday lets are not the same as PRS in any way - this is a hospitality business and has very different paremeters and rules. But fundementally 'it is a business' and should be treated as such. I feel very sorry for all the BnB's across the country run by families as their only source of income and providing a valuable service. Most of them are not set up as companies.
Everyone should be protesting that if the govt keeps killing business in order to service their own agenda then they will just cause bigger problems for themselves and society and ultimately fail. Sadly that is a long game.

Dan Wilson Craw confuses a 'tax relief' with a legitimate business cost.