If you’re considering gifting your furnished holiday let, you need to act quickly. From 6 April 2025, furnished holiday lettings will lose access to key tax benefits, including gift hold-over relief. This could make transferring your property far more costly.
Here’s what you need to know and why acting now could save you thousands.
What Is Gift Hold-Over Relief?
Gift hold-over relief is a valuable capital gains tax (CGT) relief available when gifting certain business assets. Instead of paying CGT immediately on the transfer, the gain is deferred until the recipient sells or disposes of the asset.
The recipient’s base cost of the asset is reduced by the amount of the held-over gain, so CGT is calculated on the deferred gain when they sell. This relief can also apply if the asset is sold below market value to help the buyer.
Who Qualifies for Gift Hold-Over Relief?
To qualify:
- The person gifting the asset must be a:
- Sole trader or partner in a business, or
- Shareholder with at least 5% voting rights in a personal company.
- The asset must be used in the business or by the personal company.
The relief must be claimed jointly by the giver and the recipient via a specific form, which is submitted with their Self Assessment tax returns.
Why Act Before 6 April 2025?
Currently, furnished holiday lettings are treated as business assets for CGT purposes, meaning they qualify for gift hold-over relief. However, from 6 April 2025, these properties will be reclassified as residential lets, losing access to this valuable relief.
This means:
- Gifting the property before 6 April 2025 allows you to defer the CGT bill.
- Gifting it after this date could result in an immediate CGT charge, leaving you with a significant tax bill and no sale proceeds to cover it.
Example: Betty’s Holiday Let
Betty owns a furnished holiday let that she bought for £120,000 in 2004. It’s now worth £380,000. She plans to retire and gift the property to her daughter, Lucy.
If She Gifts Before 6 April 2025:
- No immediate CGT: Betty and Lucy can claim gift hold-over relief.
- The £260,000 gain is deferred, reducing Lucy’s base cost to £120,000.
- Lucy will pay CGT on the deferred gain when she sells the property.
If She Waits Until After 6 April 2025:
- The property no longer qualifies for hold-over relief.
- Betty pays CGT immediately on the £260,000 gain.
- As a higher-rate taxpayer, her CGT bill would be £62,400 (24% of £260,000), assuming her annual exempt amount is already used.
- This bill must be paid within 60 days of completion.
Take Advantage of the Relief Now
If you’re planning to pass on your furnished holiday let to family or loved ones, acting before 5 April 2025 could save you and your recipient a significant tax burden.
Need Help With Your Tax Planning?
Understanding the best timing and approach for property transfers can be tricky, but we’re here to help. At Jon Davies Accountants, we’ll guide you through your options and ensure you maximise tax efficiencies.
Don’t miss out on this valuable relief—get in touch today!
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