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Spring budget reaction...now is not the time to panic


spring budget furnished holiday lettings reaction

The UK short-term rentals industry has rallied since Chancellor Jeremy Hunt announced the furnished holiday lettings (FHL) tax regime would be abolished (writes HCH Founder, James Varley).


There have been petitions, letters to MPs, and many articles about the potentially ruinous implications of hurting a sector which does so much to support tourism, jobs, and regional economies up and down the country.


Understandably, there has been a lot of worry among hosts and property managers, with many fearing they will struggle to make ends meet if they are subjected to arduous tax and regulation.


As a host myself, I understand the concerns. It’s been a tough start to 2024 for many of us. Rising supply has led to a dip in occupancy, with many hosts struggling to attract the number of bookings they did a year ago, while others are being forced to drop their rates to keep the guests rolling in. Throw in high energy bills, plus any unforeseen maintenance costs, and I’m sure there are plenty of hosts out there who are thinking of throwing in the towel – especially if they are facing empty calendars and the prospect of higher taxes.


That all said, my gut feeling is that it would be wrong to make a knee-jerk reaction. Every challenge brings opportunity. So, in the words of Corporal Jones from Dad’s Army (now there’s a reference for the kids!), I say don't panic! Here are some positives in light of the spring budget:


  1. The STR industry has mobilised significantly since the spring budget. The Professional Association of Self-Caterers (PASC UK) created a letter template for operators to write to their MPs, urging them not to support the abolition of the FHL tax regime, describing it as an ill-thought-out measure that will do little to ease the housing crisis. Click here to read the letter. Communicating with our elected representatives and talking up our industry will be vital as we look to influence legislators. Remember, the new rules have not been decided yet and won't be implemented until April 2025 (at the earliest). The spring budget simply said the regime would be abolished but didn’t include any further details. Now is the time to influence the debate. 

  2. Potential tax implications and new regulation (including the much-needed registration scheme) will likely weed out those operators who are not committed to the industry. And this will reduce supply and boost occupancy (and potentially rates) for those left over. On this note, I read an interesting line in last week’s Property Hub newsletter about the proposed registration scheme making it mandatory for people running holiday rentals to inform their mortgage lenders. And it was suggested there may be a significant number of people who are running holiday lets without the necessary permission from their lender or, potentially, the freeholder of their property. This might also weed out the chancers aiming to earn a quick buck. 

  3. The government must balance extra tax receipts with the impact it might have on tourism. Earning an extra £300 million from holiday rental operators would be pointless if it hurts tourism to the tune of half a billion. Even the current administration – which I have little faith in – would be able to work this out. It is vital any legislation is balanced and proportionate for the sake of operators, tourism, and local economies. 

  4. Regulation has been on the cards for a while (long before this platform was launched). In fact, our very first podcast, with Merilee Karr, was titled ‘Legislation is coming in the STR sector’. Regulation has the potential to lead to more professionalisation, a registration scheme which is fit for purpose, the unification of the industry, better lobbying, and the weeding out of hosts who spotted the pandemic boom and thought it was easy money.

We are going to be recording a couple of podcasts on this theme over the next few weeks – watch this space for further details. If you have any further thoughts on the spring budget, leave a comment or email james@holidaycottagehandbook.com. I’d love to hear from you.

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