Removal of Tax benefits on Holiday Lets by Hunt

[CatherineofArrogant]

Apparently, Hunt is to remove the tax benefits enjoyed by holiday let landlords. l’ve been trying to buy a house in my costal home town for the past 18 months but have lost out to AirBnB buyers. Will this increase the supply of home or lead to price drops?

Let's hope it will increase the supply

The tax benefits are the CGT benefits which if removed will disincentivise divestment, so it won’t increase supply.

My council has really tightened up on this so now lots of hliday lets are liable for business rates or need to pay double council tax as second homes!

Potentially also mortgage benefits. At the moment if you meet the conditions you can deduct mortgage interest from your taxable income. Normal BtL landlords can’t do that. The rumoured proposal is to put holiday homes on the same basis as BtL, ie no mortgage interest deduction .

The mortgage benefits were significant. Interest rates on short term let mortgages are much higher than normal mortgage rates but these could be off set against income tax. l had no idea of the extent of tax relief that was available until l read about Hunt’s proposals. No wonder l couldn’t compete with my ordinary mortgage! Can’t believe these tax benefits were left in place for so long.

Depends whether he tapers it off over time. I'm not very well up on the details but at a guess if he said that CGT benefits will be the same until April 2025, then 50% until April 2026 then removed completely then that would incentivise rapid disinvestment.

Whatever Hunt does it doesn't mean Rachel Reeves will agree and keep it in place. Conservatives will only be in office for a few more months. He's doing it now so she can't come along and implement it.

If it makes sense and doesn't cause too much backlash then she'll probably keep it. She'll have bigger things to worry about.

Why would labour want to reverse a measure that stops landlords paying less tax? He says he’s closing off the tax benefits to fund some reduction in income tax then it has to be implemented quite soon l would have thought?

In Scotland they have tried to implement all sorts to try and put people off buying 2nd homes, whether that be holiday homes or buy to let.

You have to pay 6% Additional Dwelling Supplement on any house that is not your primary residence. I believe stamp duty (LBTT in Scotland) is higher too.
If you want to do short term lets you have to be registered with the council and have a licence. The latest measure is charging 2nd homes double council tax.

None of this seems to have made much difference and there is still a dire shortage of homes in certain areas.

A popular scam on holiday lets is that because there is income tax reliefs for costs incurred furnishing the property the owners fund the furnishing costs of their own principal residence (which they fraudulently claim is for the holiday let).

Basically you can buy a new fridge freezer and get it set off against your income tax.

Surely you can only buy 1 of each item though. So if you bought a fridge freezer and put it in your own home what would you put in the holiday home.

@caringcarer

So let's assume the starting position is that there is a fridge freezer currently in both properties but you fancy a new one or a replacement in your own home. You then claim it was for the holiday let.

I'm glad. Holiday homes ruin communities and should be banned.

Oh Ok. I was thinking about setting up a holiday home. I have a holiday home but don't rent it out I just let family and friends borrow it if it's empty and I pay for all the furniture myself.

@thefallen

Holiday homes also destroy local economies as well.

If young educated local people cannot afford to live in areas such as the Lakes or Cornwall then they move away. This means the only employment available is low paying and seasonal tourist jobs which further depresses the local economy.

It makes me so angry. Rural communities aren't playgrounds for rich people to pop into when they fancy it and abandon the rest of the time.

All landlords can currently offset part of mortgage interest (but not capital) on rental properties.

Any clampdown on individuals will just benefit the big companies who run large property portfolios

The better approach is for councils to clobber rental properties to provide funds for social housing in specific areas

Council tax going only up to bang H is also DEEPLY regressive
it should go to at least band Z
to make it an effective land tax

I own a holiday let, which I spent a huge amount of money refurbishing and bring about 300 tourists a year to a town to spend money. There are barely any jobs in the town in question and it is pretty run down.

What jobs are there in Cornwall and the Lakes? If tourists didn’t come to those areas, they would not have the investment they currently do and would decline.

There aren’t enough jobs in rural areas because the government mismanaged investment and only focuses on London, where there isn’t enough property.

Disincentivising tourism in areas where there are no jobs is not going to help people in those areas.

I think people forget that the UK gets most of its GDP from services and tourism not manufacturing/engineering or any other big business.

As a population we probably need to accept that fact and make the most of it until we start actually manufacturing and producing things.

What if you're renting, though? You're paying higher council tax without any of the benefits of the property appreciation.