Tax experts at BDO have analysed the impact of the announcement which is expected to affect the holiday letting industry and it’s estimated 50,000 jobs as well as raise £35m in 2025/26, increasing to £245m in 2028/29.

Currently, interest incurred on loans for the purpose of a furnished holiday letting business are treated as a deduction from rental income in calculating taxable profits of the business.

From 6 April 2025, interest for businesses operated by individuals will cease to be a deduction and relief will instead be given as a 20% tax credit from the individual’s tax liability.

For higher rate taxpayers, this will mean a reduction in tax relief for interest to the 20% rate.    As trading assets, capital gains on the disposal of furnished holiday letting assets by individuals currently may qualify for business asset disposal relief: where they qualify, gains up to the lifetime limit of £1m would be taxed at a rate of 10%.