Some 65,000 second home owners could lose out under Government plans to reduce the tax benefits available for furnished holiday lettings (FHLs).
In a new Consultation document the Government proposes increasing the minimum period for which a property is available to let to the public from 140 to 210 days each year, and increasing the days when it is actually let to the public from 70 days to 105 days.
It also suggests restricting the use of loss relief from FHLs so it can only be set against certain income from the same business.
The aim is to bring the rules in line with EU law and put the focus on commercial businesses rather than those run for personal use.
In the Emergency Budget in June, the Chancellor confirmed that the previous Government's plans to withdraw the FHL rules from 6 April 2010 would not take effect.
Under the existing rules, FHLs that meet certain qualifying conditions are treated as a trade for certain purposes, which enables them to benefit from more generous loss relief than other types of lettings.
Landlords may also be able to claim capital allowances on furnishings, furniture and fixtures and enjoy capital gains tax reliefs (such as rollover relief and Entrepreneurs' Relief) that are available to traders.
The Consultation will run until 22 October 2010. The Government will then publish its response by the end of the year and intends to implement the changes in the 2011 Budget.