The Furnished Holiday Let regime was a special set of tax rules that treated qualifying short-term holiday lets as business assets rather than investment properties. This gave owners substantial tax advantages compared to standard buy-to-let landlords. However, the government abolished the FHL regime from 6 April 2025, fundamentally changing the economics of holiday letting in the UK.
To qualify as a Furnished Holiday Let for tax purposes, a property needed to meet all of the following conditions:
| Condition | Requirement |
|---|---|
| Availability Condition | Available for commercial letting for at least 210 days per tax year |
| Letting Condition | Actually let on a commercial basis for at least 105 days per tax year |
| Pattern of Occupation | No single letting exceeding 31 continuous days during any 155-day period |
| Location | Situated in the UK or EEA |
| Furnishing | Furnished to a sufficient standard for normal occupation |
Before April 2025, FHL properties enjoyed these significant tax advantages:
| Tax Feature | FHL (pre-April 2025) | Buy-to-Let | Standard Rental |
|---|---|---|---|
| Mortgage interest deduction | 100% deductible | 20% credit only | 20% credit only |
| Capital Allowances | Yes - furniture/equipment | No | No |
| CGT rate on sale | 10% (BADR) | 18-24% | 18-24% |
| Pension contribution eligibility | Yes (earned income) | No | No |
| Rollover relief | Available | Not available | Not available |
| National Insurance | Not subject to NI | Not subject to NI | Not subject to NI |
If you owned an FHL property, the 2024/25 tax year was the final year under the old rules. Key planning steps included:
From 6 April 2025, properties that were FHLs are taxed exactly as standard UK residential rentals. This means:
Yes. The Furnished Holiday Let regime was abolished from 6 April 2025 under the Finance Act 2025. From 2025/26 onwards, properties that previously qualified as FHLs are treated as standard UK property businesses for all tax purposes. No new FHL elections are possible and all FHL benefits have ceased.
To qualify as an FHL, a property needed to be available for commercial letting for at least 210 days per year, actually let on a commercial basis for at least 105 days, and no single letting period could exceed 31 continuous days during the 155-day threshold period. The property also needed to be in the UK or EEA and be furnished to a sufficient standard.
FHL properties benefited from full mortgage interest deductibility (unlike standard BTL with Section 24 restriction), Capital Allowances on furniture and equipment, Business Asset Disposal Relief (10% CGT rate on sale), pension contribution funding from FHL profits, CGT rollover relief, and gift holdover relief. All of these advantages ceased from 6 April 2025.
From 6 April 2025, your FHL property is treated as a standard residential letting. This means: mortgage interest is restricted to a 20% tax credit (Section 24), Capital Allowances are no longer available on furniture/equipment, Business Asset Disposal Relief no longer applies on sale, and CGT rollover relief and gift relief are restricted. Your tax bill is likely to increase significantly if you have mortgage debt on the property.
The decision depends on your individual financial circumstances, the property's value, outstanding mortgage debt, and your alternative investment options. The loss of BADR means CGT on sale is now 18-24% rather than 10%. However, if the property generates strong yields as a holiday let, the after-tax returns may still be attractive. Professional tax advice is strongly recommended for individual circumstances.
Yes, and this is increasingly popular. Operating holiday lets through a limited company means mortgage interest is fully deductible from corporation tax (Section 24 doesn't apply to companies), the corporation tax rate is typically lower than personal income tax on higher incomes, and profits can be extracted tax-efficiently. However, incorporation has significant upfront costs including SDLT and CGT on transfer of existing properties.
HMRC requires records for at least 5 years after the Self Assessment filing deadline. Keep: rental income records, receipts for all expenses, mortgage statements showing interest paid, invoices for repairs, and any Capital Allowance claims from pre-2025 years (these records are needed for many years as allowances claimed earlier continue to affect tax calculations).