The Intermediary – May 2025 - Flipbook - Page 50
BUY-TO-LET
Opinion
Holiday lets:
Overcoming
taxing times
J
ust as the weather starts to
brighten, the UK’s holiday
let market is showing its
staying power in the face of
economic headwinds and
policy change.
March research from Sykes Holiday
Coages showed that popular rural
hotspots, including the Cotswolds and
Cumbria, continue to deliver robust
returns for landlords, with average
incomes climbing year-on-year.
Holiday let owners across the UK
earned an average of £24,700 in 2024,
marginally up on 2023, with highperforming areas like Grasmere in
the Lake District generating over
£40,000 annually.
However, the abolition of the longestablished Furnished Holiday Leings
(FHL) tax regime at the start of April
is giving this buoyant market plenty
to consider as it enters a period of
transition. Many landlords will need
guidance on what’s changing, how it
affects their income, and how to adapt.
It’s important to remember that,
while not everyone is qualified to
offer specialist tax advice, you could
benefit from partnering with a
tax adviser who is. The taxation of
property investment is becoming
increasingly complex, and providing
access to specialist tax advice could
be a valuable additional service for
your clients.
Why change course?
Announced in the Spring Budget 2024,
the removal of FHL tax benefits is
part of the Government’s strategy to
tackle the long-term rental shortage in
tourist-heavy regions.
Previously, furnished holiday lets
benefited from mortgage interest tax
relief, capital allowances, Capital
Gains Tax (CGT) rollover relief, and
other favorable tax positions.
48
The Intermediary | May 2025
The Government estimates this new
regime will generate an additional
£300m in annual tax revenue. But
the change has also triggered concern
among holiday let owners – especially
those already feeling the strain from
rising running costs and Council Tax
hikes in certain areas.
The same March survey from Sykes
found that 33% of owners expect to
be affected by the FHL tax change,
while 45% say they have already
been impacted by other regulatory
measures, such as local Council Tax
uplis or new minimum leing
thresholds in Wales. Almost threequarters (74%) think these changes
could even harm local economies that
depend on tourism.
Offering guidance
The higher costs associated with an
increased tax and regulatory burden
are likely to give investors a sharper
focus on their other outgoings – not
least their finance arrangements.
This is an area where you can support
your clients.
Remortgaging a holiday let to
benefit from more favorable terms and
monthly repayments is one such way
to support your clients. There are still
competitive and cost-effective choices
available, so it’s worth shopping
around to see whether you can reduce
their cost of borrowing. At The
Cumberland, for example, we offer a
remortgage product with a fee of £299
for customers who qualify for your
core holiday let range.
Another way for investors to
improve returns is by investing in
renovations that either boost rental
income or make their property
more appealing than others in the
same bracket.
Upgrading interiors or adding
amenities such as hot tubs or saunas
LISA HODGSON
is senior sales manager
at The Cumberland
The abolition of
the FHL tax regime [...]
is giving this buoyant
market plenty to consider”
can improve the guest experience and
aract higher nightly rates.
Investors can potentially raise
the additional capital they need to
fund these improvements when they
remortgage. At The Cumberland,
we’re always happy to lend for
refurbishment, as long as the equity
released sits within the agreed loan-tovalue (LTV) limit.
Some landlords may also be able
to extend their borrowing potential
through top-slicing. For those earning
over £50,000, we can factor in
personal income alongside the rental
return in the affordability assessment.
A kinder approach
The abolition of the FHL regime is a
big hurdle for holiday let investors,
but it’s also a real opportunity for
you to demonstrate your value. The
sector still has plenty of potential,
and by partnering with a lender that
understands this part of the market,
you can help your clients make the
most of it.
At The Cumberland, as we celebrate
our 175th birthday, we continue to
champion a people-first, communityfocused approach to lending.
Our holiday let mortgages are
designed to support not just landlords,
but the local communities they
operate in, too. ●
