Category: FHL

How Section 24 Affects Property Investors – What You Need to Know

Property investment remains one of the UK’s most popular routes to building long-term wealth—but recent tax changes have significantly impacted profitability. One of the most important changes affecting landlords is Section 24 of the Finance (No. 2) Act 2015, commonly referred to as the “mortgage interest relief restriction.”

This restriction now affects Furnished Holiday Lets as well as Buy to Lets and HMO’s.

The changes to Holiday Lets and Serviced Accommodation are covered in this blog.

Holiday Lets – Good news for Capital Allowances – Steve J Bicknell Tel 01202 025252

More details on Section 24 are in this blog

Residential Letting – What is the Finance Cost Allowance and how are Unused Finance Costs used up? – Steve J Bicknell Tel 01202 025252

If you’re a portfolio landlord or considering property investment, understanding Section 24 is essential for financial planning and compliance.

❓ What is Section 24?

Introduced in 2017 and phased in over four years, Section 24 removes the ability for individual landlords to deduct all of their mortgage interest from rental income before calculating their income tax.

Instead of full relief, landlords now receive a basic rate tax credit (20%) on their finance costs.

💡 Why It Matters

If you own property in your personal name, this change can push you into a higher tax bracket—even if your real profits haven’t changed.

Example:

  • Rental income: £40,000
  • Mortgage interest: £25,000
  • Before Section 24: You paid tax on £15,000
  • Now: You pay tax on the full £40,000, then receive a 20% credit on the £25,000 mortgage interest

This could increase your tax bill substantially, especially for:

  • Higher rate taxpayers
  • Portfolio landlords with significant debt
  • Those receiving child benefit or working tax credits, where higher income triggers a clawback

🏛️ Company Ownership as an Alternative

Many investors are now considering buying property through a limited company, which is not affected by Section 24.

Key benefits:

  • Mortgage interest remains fully deductible
  • Corporation tax applies (currently 19–25%)
  • Potential long-term inheritance tax planning advantages

But it’s not right for everyone—incorporation involves costs, complexity, and potential capital gains tax (CGT) or stamp duty implications.

🔎 What Should You Do?

A professional review is essential. At Bicknell Business Advisers, we help landlords and property investors across the UK understand:

  • How Section 24 affects your tax position
  • Whether incorporation is right for you
  • How to structure your investments tax-efficiently
  • Planning strategies to reduce your tax exposure

📞 Book a Free Consultation Today

If you’re unsure how Section 24 is impacting you, or want to explore your options, get in touch today.


📞 Call: 01202 025252
🌐 Visit: www.bicknells.net

At Bicknell Business Advisers, we specialise in helping landlords and property businesses navigate complex tax legislation with clarity and confidence.

Holiday Let – anti-forestalling rule

The March 2024 Budget was bad news for Furnished Holiday Lets (FHL)/Serviced Accommodation.

Abolition of the Furnished Holiday Lettings (FHL) tax regime

As announced at Spring Budget 2024, the government will abolish the Furnished Holiday Lettings tax regime, eliminating the tax advantage for landlords who let out short-term furnished holiday properties over those who let out residential properties to longer-term tenants. This will take effect from April 2025.

Draft legislation will be published in due course and include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.

https://www.gov.uk/government/publications/spring-budget-2024-overview-of-tax-legislation-and-rates-ootlar/spring-budget-2024-overview-of-tax-legislation-and-rates-ootlar

The advantages likely to be affected are:

• Interest incurred on borrowings is fully deductible against taxable profits
• Beneficial capital allowances rules allowing tax relief for fixtures
• Various capital gains tax reliefs, including potential for business asset disposal relief (10% rate on sale), rollover relief and gifts hold-over relief
• Profits from FHLs can be treated as relevant earnings for pension purposes
• Income from a FHL held jointly by a married couple or civil partners is not caught by the default 50:50 split for income tax purposes

The anti-forestalling Rule

We are still awaiting the detail, but its likely that FHL’s owned by companies will not be affected by the changes. That means that company ownership would be the best option.

The anti-forestalling rule seems to prevent conditional contracts but it may still be possible to simply sell your FHL to your own company at an arms length market value, this would incur stamp duty but if the rules don’t come in to force until 2025 you might get Incorporation Tax Relief or Business Asset Disposal Relief which would save Capital Gains Tax.

As the rules are likely to be out soon its best to wait before taking action.

Time to Plan

Now is the time to consider

  • The impact of the changes on your tax
  • Whether to sell
  • Whether to sell to your own Company
  • Whether to change the use to Assured Short Term Tenancies

Working out your plan now could save you considerable tax in 2025.

steve@bicknells.net

What are the occupancy conditions for holiday lets?

tender traveling woman on board of sailing yacht

If you own a furnished holiday let in the UK, it’s important to understand the occupancy rules set out in the HM Revenue & Customs (HMRC) HS253 guidelines. Meeting these conditions can make your holiday let a profitable and tax-efficient business. In this post, we’ll explain what the occupancy rules are, what records you need to keep, when you can use a grace period, and how to monitor your occupancy, along with some examples of records.

Occupancy Rules

To qualify as a furnished holiday let, your property must be:

  • available for bookings for at least 210 days per year
  • rented out to paying customers for at least 105 days of the year
  • lettings that exceed 31 continuous days must not exceed more than 155 days during the year. Lettings exceeding 31 days don’t count as holiday lets unless there are unforeseen circumstances.

If your property meets these criteria, you can take advantage of certain tax benefits, such as:

  • claiming capital allowances on furnishings and equipment – these allowance can be substantial where a previously residential property is changed to Holiday Lets (Serviced Accommodation)
  • paying business rates rather than council tax
  • Business Assets Disposal Relief
  • Business Asset Rollover Relief
  • Gift Holdover Relief
  • Splitting profits with your spouse without needing a Form 17
  • Full recovery of Mortgage Interest

Record-keeping

To prove that your property meets the occupancy rules, you need to keep accurate records. These should include:

  • all rentals, including dates and names of customers
  • evidence of the availability of the property for rent, such as an online listing or booking system
  • any periods when the property was unavailable for rent, such as maintenance or personal use

Monitoring occupancy

To ensure that you meet the occupancy criteria, it’s important to keep track of your bookings and availability. You can use a booking calendar to monitor the number of days your property is rented out and avoid exceeding the 31-day limit. There are also software programs that can help you manage your bookings and maintain records.

Examples of records

Here are some examples of records you should keep:

  • A record of all bookings, including the dates of arrival and departure, and the names of the customers
  • An availability calendar that shows when the property is available for rent
  • Invoices and receipts for all expenses related to the property, such as maintenance, cleaning, and repairs

Many operators use Channel Managers such as

Airbnb and Vacation Rental Channel Manager Feature – Guesty

or property managers for example

Book Your Stay | Property management — Grandeur Property

Or you could use systems like

Bedful Booking System

These will easily link to modern accounting systems like Accounting Software – Do Beautiful Business | Xero UK

Conclusion

Meeting the HMRC’s furnished holiday let occupancy rules can help you run your holiday let as a profitable and tax-efficient business. By keeping accurate records of your bookings, availability, and expenses, you can ensure that you meet the criteria and take advantage of the tax benefits. With the help of software and a good booking calendar, you can monitor your occupancy and avoid exceeding the 31-day limit.

steve@bicknells.net