Owners of furnished holiday lettings face a race against time if they want to sell or gift their properties to maximise a number of tax advantages before they are abolished from April 2025, according to financial advice firm NFU Mutual. The new legislation is intended to harmonise the tax regime for furnished holiday lets with the long-term rental market but rules around capital gains tax will affect those who may be thinking about selling or gifting their holiday let. Furnished holiday lets are currently treated as trading businesses which means owners can take advantage of various capital gains tax reliefs when selling or giving away the property. However, these rules will change from April 6 2025.

       NFU Mutual said if someone wants to put in a new bathroom or kitchen or central heating to their property, they should do it before April 6 to take advantage of the current tax treatment. Sean McCann, chartered financial planner at NFU Mutual, said: “Currently, if you spend money on improvements such as putting in a new kitchen, bathroom or central heating you can claim 100 per cent tax relief, within limits.

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       "But from April 2025 you will get tax relief on repairs to the property, replacing furniture or washing machines but not for capital improvements. So, if you are planning to put in a new kitchen or extend the property it may make sense to do this before April 6 2025.”

       Those who are selling up before April 6 2025 to fund the purchase of a new furnished holiday let or other trading business may be able to claim “roll over relief” which means they can defer all or some of the capital gains tax due.

       If holiday home owner swait to sell up after this date when the new rules take effect will need to pay up to 24 per cent on any gain.

       People selling their furnished holiday let business and not planning to reinvest in another trading business may be eligible for business asset disposal relief before April 6 2025.

       This means they may only be liable to pay 10 per cent or up to ￡1million of the gain – rather than 24 %.

       McCann said out that those who plan to gift their furnished holiday let to relatives may be able to claim gift holdover relief, which means that any capital gains tax due can be deferred until the new owner decides to sell up.

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       McCann said: “If disposing of your holiday let was already in your plans, there may be benefits in doing so before the changes come into force."

       “If you are selling and buying a new furnished holiday let or other qualifying trading asset, you can roll over all or part of the gain which allows you to defer all or part of the capital gain tax payable.

       “Or if you are gifting the property, you and the person you are giving it to can claim “gift hold over relief.” This means there is no capital gains tax at the time of the gift and any CGT is “held over” until the new owner disposes of it.

       “If you’re planning on ceasing your furnished holiday let business if you do so before April 6 you may be able to claim business asset disposal relief – which allows you to have ￡1m of gains during your lifetime taxed at 10 per cent.”

       “The key message is that if you’re planning to sell or gift your furnished holiday let in advance of the changes, it’s important to take advice so you’re aware of all the implications before you make a decision,” he said.

       To qualify as a furnished holiday let for tax purposes, a property must be available for hire for 210 days and let for 105 days or more within each tax year. Lettings to families and friends at zero or reduced rates are not counted.

       You can also use profits from your furnished holiday let to make pension contributions as it counts as earned income. If you haven’t been taking advantage of this benefit, you can go back up to three years and pay a larger sum to take maximum advantage before this benefit closes on April 6.”

       McCann also points out that if someone wants to put in a new bathroom or kitchen or central heating to the property, they should do it before April 6 to take advantage of the current tax treatment.

       He said: “Currently, if you spend money on improvements such as putting in a new kitchen, bathroom or central heating you can claim 100 per cent tax relief (within limits). From April 2025 you will get tax relief on repairs to the property, replacing furniture or washing machines but not for capital improvements."