Jen Boyle, a 64-year-old widow from Falkirk, owns and runs two small holiday lets on the Scottish island of Cumbrae, home to about 1,300 people. In the last tax year, the properties generated £15,000 in turnover, though Boyle’s personal profit was only around £5,000 after expenses.
“I pay for heating, water rates, internet, new bedding, occasional repairs and for using the local launderette; I employ local cleaners, gardeners, a local guy who takes out my bins,” she says. “I only charge £420 a week in the high season. People who come to the island tend to be from the Glasgow area and generally don’t have a lot of money, so increasing my rates is not really an option.”
Boyle and her late husband bought the properties for about £30,000 each a few years ago. “They are tiny, essentially a room and kitchen,” she said. “I think if I sold them it’s highly unlikely that anybody on the island would want to live in them, they’re just too small.”
Jeremy Hunt, the chancellor, however, is hoping for exactly that. In his spring budget this month, he abolished tax relief for properties like Boyle’s, so-called furnished holiday lettings (FHLs), from April 2025.
Since George Osborne decided to scrap mortgage interest tax relief for buy-to-let properties when he was chancellor in 2015, the popularity of FHLs has soared, as this type of holiday accommodation continued to enjoy special tax allowances that long-term rentals had lost.
Amid reports about devastating shortages of affordable housing for local residents in popular holiday areas in recent years, Hunt decided to make the ownership of FHLs less financially attractive, hoping this would persuade landlords to either sell up or switch their holiday homes to long-term rentals.
Scores of owners of FHLs who got in touch with the Observer believe the new tax rules may have the exact opposite effect.
Many said the chancellor had conflated the wealthy owners of second homes with people who run holiday lettings as small businesses, often as their only source of income in areas of the country where work outside the tourism sector is scarce.
Virtually all respondents to an online callout feared Hunt’s measures would increase the number of second-home owners in the UK, rather than reduce it, as the loss of tax relief was likely to make running these businesses unsustainable for the less well-off as mortgage costs soar, and could force them to sell their properties to wealthier cash buyers.
“People confuse second-home owners who perhaps use a large property twice a year and contribute very little to the local economy with genuine furnished holiday letting owners who are simply running a business, employ local people and bring much-needed leisure income to an area that relies heavily on tourism,” Boyle said.
“I have been on a perilously low income since the death of my husband, and the income from this business has been essential. I am heartily sick of being portrayed as a money-grabbing, greedy landlady, and people like me are not the solution for the housing shortage.”
Boyle, who says her state pension will not be enough to live on, now fears that the scrapping of FHL tax relief will reduce the value of her properties when she wants to sell them.
“I am very concerned,” she said. “These flats were built by the Victorians precisely for holiday ownership. I don’t know who may want to buy them [for what they’re currently worth] if these changes go ahead.”
Many owners of holiday rentals with mortgages said they would probably have to sell as the loss of tax relief would make their rentals unprofitable.
Many people who own their holiday homes outright, meanwhile, said they would keep them, but either stop renting them out, or charge guests more in future –suggesting the UK tourism sector could be dominated by affluent investors catering for well-to-do customers.
Cate, 52, who bought a three-bedroom property that had previously been a second home in the popular holiday spot of Gwynedd in north-west Wales in 2019, said the chancellor’s plans could be terminal for her tourism business, which, she said, served “modest holidaymakers who want to enjoy the Welsh countryside”.
“It’s a genuinely cheap retreat for people, my guests love it. This was meant to be my retirement plan, which is now potentially in ruins,” she said. “After [ex-prime minister Liz] Truss, my interest repayments on my property increased from £500 to £1,400 per month, [and] any profit disappeared. In the 2022-23 tax year, my turnover was £47,000, but my net profit was only £4,000.
“I’m Welsh and really care about the housing situation here, but this is pitting people against each other without solving the housing crisis.”
Last year, about 8,000 out of Gwynedd’s 55,000 households were second homes.
A single mother from Wales, who wanted to stay anonymous, said she had converted a house into a holiday rental that had previously been on the market for two years.
“There isn’t a buying culture here – wages are too low, people want to rent,” she said. “But there isn’t enough council housing stock and the long-term rental market has been made more unattractive and unaffordable for landlords.”
Scores of holiday home owners, most of them mortgage-free, said they could not be persuaded to accept long-term tenants again under current conditions.
“I will never return to the buy-to-let space after having a tenant in my property for eight months, receiving only the first two months’ payments, and now having to wait another six months in the court queue to evict,” said one woman who rents out her property to holidaymakers in Morecambe.
“I’ll see how I go, but if I’m running at a loss I’ll keep the property as a second home for my family instead, a real shame for the local economy.”
This sentiment was echoed by Claire, a 51-year-old mother-of-three, who, last year, left her NHS job in radiography to run a mortgage-free holiday cottage in West Yorkshire and ruled out switching to long-term tenants.
“I wouldn’t let it as a residential property, I couldn’t hand over the keys to a tenant with that many rights. We won’t sell, but we’ll put the prices sky-high, to cover costs that were previously deductible.
“This hits the wrong people. The rich second home owners, who can afford to let their properties sit empty except for a few weeks a year, will carry on.”
One of them is Max, 59, from Northampton, who owns a three-bed house in North Devon.
“We would never let this house long-term because we use it ourselves once a month,” he said. “Even if we did – my housekeeper struggles to rent locally, but our house is worth £750,000. Nobody living here could rent or buy it. Without making long-term letting attractive again and bringing back the tax breaks for buy-to-lets George Osborne scrapped, this attack on the FHL industry is a complete waste of time.
“There’s plenty of empty space here that could be used to build affordable and social housing, which could be solved with planning policy.
“If it becomes too much of a ball ache for us to rent this house out to holiday makers, we’ll just turn it into a second home, it would make no difference to my overall wellbeing.”
