THE government has reinstated tax breaks for furnished holiday lettings, though the chancellor warned yesterday that it would consult on changing the allowances in 2011.
The restored rules apply to around 120,000 landlords who run holiday homes. Osborne stressed the importance of tourism to the UK economy in his Budget speech.
“There are many small businesses in the tourism industry today. To help them, I am reinstating the favourable tax rules for Furnished Holiday Lettings, which our predecessors had planned to repeal,” he told Parliament.
The Labour government had drafted legislation to abolish the allowances, which mostly benefit second home owners, but it was left unused in the wash-up at the end of the last Parliament.
The tax stipend applies to properties rented as holiday accommodation for a minimum of 140 days a year and let for at least 70 days.
The government will begin a consultation over the summer to look into ensuring the tax breaks meet EU requirements.
Under the current rules, landlords can write off tax on trading losses and postpone capital gains tax by investing in another property.
Liam Bailey, head of Knight Frank residential research, said the rules had already affected buy-to-let customers. “Very early evidence suggests that the second-home market, which was very strong up until the CGT rise was first mooted in May and which then promptly stalled, will kick back into life very rapidly.
“We experienced a noticeable upsurge in calls to our second-home teams in the hours after the chancellor sat down.”