July 2024

The staycation – a phenomenon that became the only way to have a holiday during the pandemic. Investors bought up holiday lets and Airbnbs just as quickly as families chucked their buckets, spaces and suitcases in the boot of the car.

But is the staycation party over? While international travel has been back on the cards for more than two years, both holiday makers and landlords have been persevering with short holiday lets.

In 2024, however, the first major cracks in this symbiotic business model have started to show. The Chancellor used his April Budget to announce the future abolishment of the Furnished Holiday Lettings (FHL) tax relief regime.

This perk currently applies to owners of holiday rentals and Airbnbs where furniture is supplied. It gives these landlords preferential tax breaks when compared to long-term, traditional-tenancy investors.

The series of tax breaks consists of the ability to claim capital allowances, have income from their holiday let business be classed as ‘earned’ for pension contributions and tap into various capital gains tax reliefs, including Business Asset Disposal Relief (BADR).

The ban will come into force on 6th April 2025 and when applicable, holiday let landlords will no longer be able to deduct the full cost of their mortgage interest against their rental income when completing their tax return, and they’ll no longer be able to access a discounted rate of capital gains tax (CGT) when they sell.

Although the Chancellor has framed the announcement as a way to tackle a shortage of properties for local people in tourism hot spots, the extra revenue will swell the current Government’s coffers by an estimated £300 million.

Thos behind the decision hope holiday let landlords will be tempted to switch to long-term, traditional rentals or sell their investments for release into the owner-occupier market, rather than continuing welcoming holiday makers.

Something that may influence a landlord’s decision is new analysis by Marc von Grundherr – a lettings professional who looked at the supply and demand metrics in 10 of Britain’s short stay holiday hotspots. He concluded that while the number of available Airbnb-style short lets had increased - with over half a million live listings – occupancy levels had significantly dropped.

Numbers have fallen the most drastically in Devon (-16%), Dorset (-14%) and the Cotswolds (-14%), with reductions also noted in London, Manchester, the Peak District, the Lake District, Cornwall, Somerset and Edinburgh.

The byproduct is a drop in landlord revenues, with decreases as pronounced as -7% in Devon, -4% in Cornwall, -4% in London and -3% in Manchester.

Speaking about the options open to holiday let landlords, LandlordBuyer’s Managing Director, Jason Harris, says switching to a traditional let with a long-term tenant isn’t an appealing option for landlords in the current climate: “Whichever party gains control after the election, there will be changes to the private rental sector. Many of those will make it more complex and costly to run a buy-to-let.”

He adds: “For many investors, the simplest option will be to dispose of their holiday lets, especially as landlords have a narrow window to sell and benefit from the reduced CGT levy of just 10%. Although completing a sale by April 2025 sounds feasible, My Home Move Conveyancing has recently found the current average time it takes to sell a home in Britain is 146 days. Those selling to LandlordBuyer can comfortably make the CGT deadline, wrapping up exchange and completion in less than two months.”

LandlordBuyer can work with investors to dispose of single Airbnbs right through to holiday let property portfolios. We buy properties fast for cash anywhere in the UK. You can request a quick cash offer here, or contact the team for advice regarding your individual circumstances.

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