The Abolition of the Furnished Holiday Lettings Tax - A New Dawn for the Central London Lettings
The recent government announcement to abolish the Furnished Holiday Lettings (FHL) tax regime represents a seismic shift in the landscape of the London property market, particularly affecting the Central London Lettings sector.
The decision by the government eliminates the tax advantages that landlords of short-term furnished holiday properties enjoyed over those offering residential properties to longer-term tenants. This article by Greater London Properties explores the implications of this significant policy change on the Central London Lettings Market.
Levelling the Playing Field
The abolition of the Furnished Holiday Lettings tax regime is set to level the playing field between the short-term holiday lettings and traditional residential lettings markets. Previously, landlords of furnished holiday lettings could benefit from tax advantages not available to those letting residential properties on a long-term basis, such as more favourable capital gains tax reliefs and the ability to deduct certain expenses. Removing these incentives could lead to a re-evaluation by property owners of the viability and attractiveness of short-term holiday lettings compared to long-term rentals.
Impact on Supply of Long-term Rentals
One of the most immediate effects of this policy change could be an increase in the supply of properties available for long-term rental. Landlords who previously focused on the short-term holiday let market may now find long-term letting more financially appealing or simpler from a tax perspective. This potential shift could enhance the variety and number of properties available to long-term tenants, addressing one of the critical challenges in the Central London lettings market: the shortage of high-quality, long-term rental properties.
Implications for Rent Levels and Market Dynamics
The increased supply of long-term rental properties could also have implications for rent levels in Central London. In the short term, an influx of former holiday let properties into the long-term rental market could lead to competitive pricing, potentially stabilising or even slightly reducing rent levels. However, the long-term impact on rents will depend on the balance of supply and demand dynamics, which are influenced by a variety of factors including economic conditions, population growth, and overall housing market health.
Opportunities for Landlords and Investors
For landlords and investors, the change presents new considerations for their investment strategies. Those who own properties that were previously let on a short-term basis will need to assess the potential returns from long-term letting, taking into account the different operational and financial frameworks. This could lead to a reassessment of portfolio compositions, with some investors potentially deciding to diversify their holdings or invest in property enhancements to attract long-term tenants.
Enhancing Community Stability
From a broader perspective, encouraging more long-term rentals over short-term holiday lets could contribute to greater stability within Central London communities. Long-term residents foster a sense of community and continuity, which can be disrupted by high turnover in holiday let properties. By aligning the tax treatment of all rental properties, the government's policy may indirectly support the development of more cohesive and stable neighbourhoods.
The abolition of the Furnished Holiday Lettings tax regime marks a pivotal moment for the Central London lettings market. While the full impact of this policy change will unfold over time, it is clear that it will reshape the dynamics between short-term and long-term rental markets. As these changes take effect, Greater London Properties remains committed to providing expert guidance and support to all our landlords, investors, and tenants navigating the evolving landscape of Central London property market.
If you are currently short letting your property and would like information on what regulations you would need to enter the Long Term rental market, please give our residential team a call on 0207 113 1066. You might be surprised about what the current AST value is. Arm yourself with the facts and make the best decision for your investment in the long term
Warm Regards
Kate, Director