Time is running out to claim capital allowances on Furnished Holiday Lets
In March 2024 the government announced that the Furnished Holiday Letting tax regime would end from the 1st April 2025. The regime offers various benefits, including the ability to claim capital allowances on plant & machinery in the property, resulting in significant tax savings.
The good news is the withdrawal rules are very generous in relation to expenditure incurred in the run up to the withdrawal. While the scheme ended at the end of March, the time to consider expenditure incurred in recent years is now.
What can be claimed?
Capital spend on a Furnished Holiday Let in the last two or so years could give rise to significant capital allowances that will need to be claimed before it’s too late. The allowances would relate to plant & machinery within the property such as furniture, fixtures and fittings, services, flooring and appliances.
Deadlines
Expenditure incurred before 1 April 2025, in an accounting period that ended within the last 2 years, is within the window for claim, but that window will close in the coming months.
For example, for companies with a March YE, the Year ended 31 March 2024 tax return could still be amended – the deadline for so doing would be 31 March 2026.
For individuals the Year ended 5 April 2024 tax return will be amendable until 31 January 2026.
What's the benefit?
In the event of a property refurbishment, more than half of the amount spend may qualify for first year allowances. This would mean a £200k refurbishment may give rise to first year allowances in excess of £100k, equivalent to tax savings of over £40,000 assuming a 40% tax rate.
Similarly, allowances can often be claimed where a property has been purchased for use as an FHL, particularly when the property was previously residential.
What’s the next step?
YesTax will undertake free, no commitment, entitlement reviews on Furnished Holiday Let purchases and refurbishments, in order to estimate the allowances available.
Get in touch at cal@yes.tax to get started.