The cost of UK holiday rentals heats up (unlike the great British summer weather)

When it comes to choosing between a holiday in the UK or in a traditional European holiday destination, one might be forgiven for assuming that the budget savvy family would be content to explore the delights of the many beautiful locations closer to home in the UK. But with the cost of holiday rentals for a week in a popular UK destination now generally being no less, and frequently substantially more, than similar accommodation abroad, it seems that many families are once again choosing to travel to get the benefits of a lower cost of living and more reliable weather for their well-earned summer break.

Continued uncertainty about the taxation of furnished holiday lettings (FHL) is not helping, potentially leading to landlords exiting the market and selling up properties while various reliefs remain available to them to minimise the resulting tax liabilities, at the same time reducing supply of accommodation still available to satisfy the remaining demand.

Whilst the proposed abolition of the favourable FHL tax regime was announced in the Spring Budget 2024 the changes were not legislated prior to Parliament being dissolved in advance of the forthcoming General Election. The announcement was brief and there is no indication as to when we may receive the corresponding draft legislation, if at all, given a potential change in government. There was also mention of an anti-forestalling rule, the scope and impact of which is not entirely clear. So, whilst it seems that continuing FHL businesses may be less tax-efficient from 6 April 2025 and that landlords should consider the potential impact and their options in response, some of the implications from this proposed change remain very unclear, making planning difficult.

The major party manifestos make no mention of the FHL regime, meaning landlords may have to wait several months yet to have some certainty of their tax position going forward. In the meantime, many may be hoping for a long hot summer to persuade those holiday makers as yet undecided to book their staycation while they can. This all seems unsatisfactory – much like the current weather.