Second Home Owners to Lose Tax Benefits Next Year

As of April next year, owners of second homes will lose a number of tax benefits they enjoy now. They will be unable to write off trading losses against their tax bill; also, capital allowances and capital gain benefits will vanish. Currently, a home is defined as a second (or holiday) home if it is furnished, run as a commercial property and being offered for rent for at least 140 days a year. Also, it has to be let for at least 70 days a year in order to attract tax benefits. The tax benefits are only available to UK properties. The only good news is that EU citizens who have holiday lets will benefit from the same tax allowances till next April. The only way to avoid all the negative consequences is to sell the second home. If the property is sold until April 5th, 2010, the homeowner will be able to apply for entrepreneurs’ relief, which implies gains of up to £1 million that allows attracting a lower CGT rate. Smith & Williamson tax partner said that the new measure can result in a rush of selling properties, which might lead to oversupply of properties, which will delay the recovery of UK housing market.