There have been many changes for landlords over the recent years, the most commonly known being the restriction of loan interest tax relief to 20% where you rent out a property.
The much-publicised abolition of the more favourable furnished holiday let regime has far reaching implications, some of which people may not be aware of.
One such implication is the allocation of property income and losses between husband and wife, or civil partners, of jointly owned property with effect from 6 April 2025.
It is widely known that where a husband and wife, or civil partners, own a rental property jointly if they want the income allocated on a basis other than 50:50, which may be beneficial if one is a higher rate taxpayer, then there are several steps that you need to take to achieve this.
One of these is to complete and submit to HMRC Form 17, to advise how the income and expenses should be split between them. This form has to be submitted to HMRC within 60 days of being signed and is only effective from the date of the form.
Now that property previously treated as furnished holiday lets is taxed at normal property income, how many actually realise that if you know what the income split on a basis other than 50:50 you need to take action?
This is because if you do nothing, then the income will be split 50:50.
The change to the treatment of furnished holiday lets will also affect
- The ability to make pension contributions as this income will no longer count towards net relevant UK earnings when calculating maximum pension relief
- The amount of income tax relief that can be claimed will be restricted to 20%
- Favourable capital gains tax reliefs are withdrawn such as business assets disposal relief and rollover relief as they no longer qualify as business assets
- If you have a property business which includes a furnished holiday let, then you will need to consider the changes and how this affects the accounting treatment for example the ability to claim capital allowances
If you are affected by the changes and want to discuss the above further, please give us a call.