House prices: Rises slow as sellers flood the market

Plans to tighten the rules on furnished holiday lettings will make it more difficult for owners to qualify for generous tax relief.

The Treasury proposes to raise the minimum period that a holiday home must be both let and available for letting each year, limiting the time that investors can relax in their own properties.

At present, the rules require homes to be let for 70 days a year and available to let for 140 days. But the Treasury plans to raise these levels to 105 days and 210 days, respectively.

Leonie Kerswill, a partner at PriceWaterhouseCoopers, said: “The changes will hit holiday homeowners who regularly use their properties for family trips and don’t tend to leave much time available for members of the public to use them.

“They will have to work harder to ensure that they let their homes out for 3½ months of the year.” The proposals, announced yesterday, include plans to tighten the rules on how losses can be offset against future income, bringing holiday lettings in line with other lettings businesses.

Owners will be able to offset losses only against income from the property, rather than from other income or investments. However, the Government is not proposing to change the tax relief available to owners of furnished holiday lettings, which includes the qualification for entrepreneurial relief on capital gains tax at 10 per cent and rollover relief on the tax.

The European Union has ruled that Britain’s furnished holiday lettings rules must also apply to properties owned across Europe.

The Labour Government had opted to scrap the scheme entirely, fearing that it would lose significant revenue as investors took advantage of the various tax reliefs available to invest in properties abroad.

Patrick Stevens, of Ernst & Young, said: “There are a substantial number of Brits with holiday homes in Europe and extending the present rules to the whole of the EU would prove too expensive.

“These changes will ensure that it is less of an easy option for investors.”

Proposed changes to pension tax relief will hammer another nail into the coffin of final salary schemes, accountants and pensions experts have said after the publication of Treasury plans to curtail tax relief for higher earners. The Treasury wants to replace the existing, hugely complex regime with a much simpler one with a much lower annual allowance. The sting in the tail comes in a change to the way the Treasury plans to calculate the notional contribution made by employers for staff in final salary schemes.

Article taken from the Times