A whole host of tax breaks relating to furnished holiday homes are to be swept away on 6 April. And although the Conservatives have pledged to restore them if they win the election, you may not want to risk it. Under the current rules you can do all kinds of things.
Offsetting the cost of furniture and fittings against earnings, paying reduced capital gains tax when you sell, and enjoying certain inheritance tax benefits are examples, says James Kirkup in The Daily Telegraph. But that is all set to end.
KPMG is advising some clients to sell holiday homes that aren’t profitable, says Elizabeth Colman in The Sunday Times. Do so before 6 April and entrepreneur’s relief will reduce CGT to 10% on the first £1m of any gain. Say you bought a property in December 2003 for £100,000 and have let it furnished ever since. Now it is now worth £300,000.
If you sell before 6 April you will be taxed at 10% on the £200,000 gain (£20,000). But sell after and you will be taxed at 18% – that’s £36,000. David Kilshaw of KPMG says some investors who don’t realise these tax breaks are being chopped “might get a nasty shock”.