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‘A politically guided election year sticking plaster’


furnished holiday let tax rules UK jeremy hunt

Industry expert Richard Vaughton has described UK government plans to abolish the furnished holiday lettings tax regime as ‘a politically guided election year sticking plaster’.

 

Mr Vaughton published a detailed appraisal of the UK short-term rentals industry following Chancellor Jeremy Hunt’s announcement that holiday homes would be treated differently for tax purposes from 2025, with legislation set to be introduced soon.

 

The proposals have been heavily criticised by many leading figures in the short-term rentals industry, including Fiona Campbell, CEO, Association of Scotland's Self-Caterers, and Ben Edgar-Spiers, Head of Regulation & Policy, Sykes Holiday Cottages.

 

Mr Vaughton said: “Building more housing is the simple answer to the UK’s housing crisis but this furnished holiday lets exercise is just a politically guided, election year sticking plaster. Data from the Department for Levelling Up, Housing & Communities showed almost twice as many dwellings listed as empty as there are for second homes (468,000 versus 253,000). What about the empty ones?

 

“Registration is a good idea to clarify and make sense of all the data. This should have been done before the government made essential decisions on ambiguous data.”



Mr Vaughton ended his appraisal with 10 predictions for leisure and urban destinations in the UK.

 

1.     Many owners will continue to consider their second homes as appreciating assets and try to raise rental prices to avoid loss of income, but they will be more concerned about ‘washing their face’ rather than profit. Guests are already paying too much, and occupancy is ‘soft’, so tourism will suffer. House prices may drop 5-10% locally, affecting existing residences too.

 

2.     The FHL rules require stays of no longer than 30 days, so expect the more mobile traveller out of season and fewer turnarounds and expenses.

 

3.     Those close to retirement age may decide to sell their primary home, move to their second home earlier than planned and take the cash. All the places the government wants to reduce the number of holiday rentals are the most popular retirement destinations. We see this already – a higher percentage of people aged 65+ are moving. This government report shows that the population in rural areas has a higher proportion of older people than in urban areas. The average age in rural areas is higher and has increased faster than in urban areas.


4. Some will residentially let, of course, but prices will be high initially and then be challenged as wages get hit and local gross income drops, especially in tourist areas.

 

5.     Leisure destinations tend to have properties in lovely places. Those that sell will not discount heavily, but more properties may be on the market. These will be picked up as early retirement properties and empty holiday homes or places for their children to live or subsidise for holidays.

 

6.     90% of these destinations rely on tourism; without that, there is little employment except for local government and services. The government has clarified that there will be cuts, and local authorities are already cutting services. The complaint has always been ghost towns in the winter. Without affordable accommodation and sufficient choice, they may also be ghost towns in the summer. The European southern sun is still attractive to travellers and often less expensive.

 

7.     Necessity is the mother of invention, and well-run rentals, which are, in effect, small businesses, will start to think outside the box and work around this new scheme in creative ways. Already, tax experts and entrepreneurs are considering ways to achieve this.

 

8.     There are already options, such as using a private limited company – but it is not for everyone, and your accountant probably needs to be involved. This may be the only solution for those with multiple ownerships and full-time businesses.

 

9.     A limited number of hotels will win, and they will raise prices. With the rise of the aparthotel trade, they will need the correct licenses. They will replace holiday cottages and make them unavailable for locals to rent. Global real estate corporations may own these and not reinvest locally. Sad Victorian bed and breakfasts, and guest houses, ready for conversion, are potentially cheaper alternatives to houses for local people to buy. Still, the construction industry is not doing well, and planning delays and constraints mean this will also face hurdles.


10. The registration scheme will mean grandfathered-in properties that have been rented will see greater values, so there may be a rush to buy more holiday homes before June 2025, having the opposite effect on prices. We will see restrictions happen, but those who restrict the least may see the most tourism income.



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