An influential new report wants higher taxes for landlords letting holiday properties.
The Office for Tax Simplification - a division of HM Treasury that feeds its reports directly to the Chancellor of the Exchequer, the Bank of England and many other financial sector opinion formers - says short term rentals described as holiday lettings enjoy more favourable tax treatment than the main property income rules with more tax relief for costs, including interest, and potentially a reduced Capital Gains Tax bill on disposal.
It says there are roughly 127,000 furnished holiday lettings businesses owned by individuals declared to HMRC in personal tax returns, including 17,000 relating to properties outside of the UK but in the European Economic Area.
“The widely held view of respondents was that this represents a relatively small core of people running a substantial short term letting business, and a long tail of second-home owners renting one property” says the report.
But the OTS says bluntly: “The OTS recommends that the government consider whether there is continuing benefit to the UK in having a separate tax regime for furnished holiday lettings.The OTS recognises that removing the furnished holiday lettings regime could put pressure on the boundary between whether a taxpayer has a property business or a trade, as many would currently use that regime as a proxy for many of the benefits of the trading rules.”
If the government acts on this in the Autumn Statement next week, the OTS recommends “that the government consider whether certain property letting activities subject to Income Tax should be treated as trading and whether it would be appropriate to introduce a statutory … test to define when a property trading business is being carried on.”
The Daily Telegraph reports that under the current rules, an owner earning £24,000 a year pays about £5,775 in income tax, assuming the property is owned jointly by a couple who are both higher rate taxpayers. Under a new system, they would have to fork out £7,687.
Perhaps the good news for landlords fearful of yet more possible tax rises, is that the Office for Tax Simplification is itself to be abolished - one of the few proposals in the calamitous September mini-Budget that has not been reversed.
Want to comment on this story? Our focus is on providing a platform for you to share your insights and views and we welcome contributions.
If any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals, then the post may be deleted and the individual immediately banned from posting in future.
Please help us by reporting comments you consider to be unduly offensive so we can review and take action if necessary. Thank you.
.png)
Join the conversation
Jump to latest comment and add your reply
Tax simplification ?? that always was a joke
Simplify tax - get rid of politicians.
This is called screw as much money out of the UK tax payer as possible and when/if the country's finances ever get in a healthier state 😂 do you think taxes will ever come down? Not a chance. Too many government outsourcers wanting their cut of the pie!
Well yes tax is over complicated, but surely the simpler solution would be to tax what I call normal single let BTL in the same was as any other business, and get rid of S24? In reality they are just looking for ways to get as much out of us as they can.
And all comes back to that old law of '' unintended consequences'' increased rents
If all types of letting were treated in the same way from a tax point of view standard BTL tenants wouldn't be looking at quite so high rent increases.
Why are holiday lets taxed less onerously than long term homes?
Why does up to £1000 not count for some type of letting but does for long term homes?
Why is £7500 tax free on Rent a Room but not on long term homes?
It isn't landlords being greedy, we don't actually make any more money, as the government take so much in extra tax.
TWO WRONGS DON’T MAKE A RIGHT. Increased tax on my short let’s won’t make me return them to BTL. Only the removal of section 24 would make me do that.
I have said for a while now… We are sheep to be sheared. 🐑
Please login to comment