Should I sell my FHL property before April 2025?

For tax years up to and including 2024/25, FHL properties still qualified for Business Asset Disposal Relief (10% CGT rate). If you sold before 6 April 2025, you may have benefited from this lower rate. Sales from April 2025 onwards are taxed at standard residential CGT rates of 18% or 24%. Professional tax advice is essential.

Can I still use Capital Allowances after FHL abolition?

No. From April 2025, Capital Allowances are no longer available for furniture, furnishings, or equipment in what were previously FHL properties. Standard residential landlords cannot claim Capital Allowances on contents. However, expenditure on plant and machinery integral to the building structure may still qualify in certain cases.

Can FHL profits fund pension contributions?

Under the old FHL rules, profits from FHL properties counted as earned income for pension contribution purposes, allowing high contributions to pension schemes. From April 2025, FHL properties are standard rental properties and income is unearned, so it can no longer fund additional pension contributions beyond the standard limits.

How do I compare FHL vs BTL after the 2025 abolition?

After April 2025, there is no meaningful tax distinction between an FHL and a buy-to-let for a newly acquired property. Both are subject to Section 24 mortgage interest restrictions, standard income tax rates, and the same CGT rates on sale. The choice between short-term holiday letting and long-term BTL comes down to yield, management intensity, and local market conditions rather than tax.

What transition steps should FHL owners take?

Key transition planning steps include: maximise Capital Allowance claims for the final FHL year (2024/25) before abolition; review whether to sell before 6 April 2025 to benefit from BADR if appropriate; consider transferring to a limited company structure for future efficiency; review financing arrangements given the Section 24 restriction will now apply.

What is Business Asset Disposal Relief for FHLs?

Business Asset Disposal Relief (BADR, formerly Entrepreneurs' Relief) allowed FHL property owners to pay CGT at just 10% on qualifying gains when selling the property, subject to a lifetime limit. This was a huge advantage over the 18-24% standard residential CGT rates. It ceased to apply to FHL properties sold after 5 April 2025.

Are FHL losses affected by the abolition?

FHL losses accrued before abolition may still be available for offset but specific transitional rules apply. Losses from the FHL pool that have not been used cannot simply be carried forward and offset against general property income from 2025/26. HMRC issued guidance on transitional loss treatment - consult a tax adviser to ensure losses are correctly preserved.

What counts as a repair vs improvement for FHL/rental tax?

A repair restores something to its original condition and is immediately deductible against rental income. An improvement enhances the property beyond its original state and is a capital cost - it can reduce CGT on sale but not rental income tax. For example, replacing a broken boiler like-for-like is a repair, but upgrading to a more powerful, efficient system could be an improvement.

What is the Replacement of Domestic Items Relief?

Standard residential landlords (not FHL) can claim Replacement of Domestic Items Relief when replacing furniture, white goods, and household items. They can deduct the cost of the replacement item from rental income (not the original purchase). This replaced the old Wear and Tear Allowance. Note: this only applies to items replaced like-for-like - upgrades where cost exceeds the equivalent replacement cost are not fully deductible.

Is there VAT on FHL income?

Holiday letting can attract VAT if your total taxable turnover exceeds the VAT threshold (£90,000 for 2025/26). Residential rental income is VAT-exempt, but holiday lets are a commercial activity. If your Airbnb/FHL income exceeds £90,000, you must register for VAT and charge 20% on bookings. This is a significant additional tax burden for high-income holiday lets.

How does FHL abolition affect my pension planning?

One of the key FHL tax advantages was that net FHL profits counted as relevant UK earnings for pension Annual Allowance purposes. This meant FHL owners could make much larger tax-efficient pension contributions. From April 2025, this benefit is lost. FHL owners who had been maximising pension contributions from FHL profits will need to review their pension strategy.

What is the SDLT position for holiday let purchases?

Holiday let properties (FHL or not) are subject to the higher rates of SDLT (5% surcharge on top of standard rates) as they are not the buyer's main residence. This has always been the case. SDLT rates for 2025/26: 0% up to £125,000 (then +5%), 2% on £125,001-£250,000 (+5%), 5% on £250,001-£925,000 (+5%), 10% on £925,001-£1.5m (+5%), 12% above £1.5m (+5%).

What records do I need to keep for rental property tax?

HMRC requires you to keep records for at least 5 years after the Self Assessment filing deadline for the relevant year. For rental properties, keep: rental income records (statements, bank deposits), receipts for all expenses claimed, mortgage statements showing interest paid, invoices for repairs and improvements, records of any Capital Allowance claims, and any letting agreements. Good record keeping is essential to substantiate your claims.

What are the rules around FHL and joint ownership?

Jointly owned FHL properties (before abolition) allowed each owner to claim their share of tax advantages separately. In a marriage or civil partnership, the 50:50 split rule applies for tax unless a Form 17 declaration is submitted to HMRC declaring a different beneficial interest split. This allowed tax planning by transferring beneficial interest to the lower-income spouse. These joint ownership rules continue to apply to rental properties after FHL abolition.

What is the difference between FHL income and trading income?

FHL income was always treated as property income for income tax, not trading income. This meant it benefited from many business-like reliefs (BADR, pension funding, Capital Allowances) while being categorised as property income in practice. Trading income (e.g. a hotel or B&B you run as a genuine business) is subject to Class 2 and Class 4 NI and has different accounting rules. Most Airbnb and FHL hosts are property investors, not traders.

What happens to FHL loss relief after April 2025?

Under transitional rules, FHL losses that arose in the FHL pool before April 2025 can potentially be offset against the new unified UK property business income from 2025/26. However, the rules are complex and HMRC has provided specific guidance. You should not assume FHL losses automatically carry forward and merge with general rental losses - seek professional advice to ensure the correct treatment.

How do business rates apply to my holiday let?

In England, if your holiday let is available for short-term letting for at least 140 days and actually let for at least 70 days in the previous year, it is assessed for business rates rather than council tax. Many small holiday lets qualify for Small Business Rate Relief and pay little or no business rates. From April 2023, the criteria were tightened and evidence of actual lettings must be provided.

How does FHL abolition affect EIS/SEIS investments?

FHL properties themselves were never eligible for EIS or SEIS investment, as property letting is specifically excluded. The abolition of the FHL regime has no direct impact on EIS/SEIS. However, if you're looking for alternative tax-efficient investments now that FHL benefits have gone, EIS and SEIS offer income tax relief and CGT deferral/exemption and may be worth considering as part of a broader portfolio.

What are the energy efficiency requirements for holiday lets?

From April 2025, all rental properties (including former FHLs) must meet energy efficiency standards. The current minimum EPC rating for new tenancies is E, with proposals to increase this to C by 2030 for all private rented properties. Landlords face potential fines of up to £30,000 per property for non-compliance. FHL properties were previously exempt from some EPC requirements; after abolition they fall under standard rental EPC rules.

James Mitchell · Senior Tax Advisor (CTA, ATT) · Reviewed Apr 2026

Furnished Holiday Let Tax Calculator UK

FHL Tax Calculator (2024/25 vs Post-Abolition)

FHL Annual Income (£/year)

Mortgage Interest (annual £)

Other Allowable Expenses (£/year)

Capital Allowance Claims (£/year)

Income Tax Band

Under Old FHL Rules (2024/25)

FHL Income -

Less: Mortgage Interest (fully deductible under FHL) -

Less: Other Expenses -

Less: Capital Allowances -

FHL Taxable Profit -

Income Tax Under FHL Rules -

Under Standard BTL Rules (From 2025/26)

FHL Income (same) -

Less: Other Expenses Only (no full mortgage deduction) -

Taxable Profit (BTL - no mortgage/capital allowance deduction) -

Tax Before Mortgage Credit -

Less: Mortgage Interest Tax Credit (20%) -

Income Tax Under BTL Rules -

Annual Tax Increase Due to FHL Abolition -

Furnished Holiday Let Rules - A Complete Guide

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.

FHL Qualifying Conditions (Historic - for 2024/25 and prior years)

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

FHL Tax Advantages (Now Abolished)

Before April 2025, FHL properties enjoyed these significant tax advantages:

Full mortgage interest deductibility: Unlike BTL, 100% of mortgage interest was deductible against FHL income
Capital Allowances: On furniture, equipment, appliances - claiming AIA or annual writing-down allowances
Business Asset Disposal Relief (BADR): CGT at just 10% on disposal (vs 18-24% for standard property)
CGT Rollover Relief: Defer CGT by reinvesting proceeds into another qualifying business asset
Gift Holdover Relief: Transfer property without immediate CGT on the gain
Pension contributions: FHL profits counted as earned income, enabling higher pension contributions
Enterprise Investment Scheme: FHL owners could potentially invest in EIS for CGT deferral

FHL vs Buy-to-Let vs Standard Rental Comparison (2024/25)

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

Transition Planning: What FHL Owners Should Do

If you owned an FHL property, the 2024/25 tax year was the final year under the old rules. Key planning steps included:

Maximise Capital Allowances in 2024/25: Claim Annual Investment Allowance (£1,000,000 limit) on any remaining qualifying expenditure before abolition
Consider timing of sale: Sales completed before 6 April 2025 could benefit from BADR at 10% CGT rate
Review company structure: Operating through a limited company avoids Section 24 and corporation tax rates may be more favourable
Pension maximisation: Use 2024/25 profits to make final large pension contributions eligible under FHL earned income rules
Review financing: Higher borrowing costs after Section 24 kicks in may affect viability of leveraged holiday lets

What Happens After FHL Abolition (from 2025/26)

From 6 April 2025, properties that were FHLs are taxed exactly as standard UK residential rentals. This means:

Mortgage interest is restricted to a 20% tax credit (Section 24 applies)
No Capital Allowances on furniture or equipment going forward
CGT at standard residential rates (18% or 24%) on eventual sale
No Business Asset Disposal Relief
Profits are unearned income - cannot fund additional pension contributions
No rollover or gift holdover relief

How Furnished Holiday Let Tax Calculator Works

This calculator applies the latest 2025/26 HMRC tax rates to estimate your tax position. The UK uses a progressive tax system where different portions of your income are taxed at different rates. Only income above the tax-free personal allowance is subject to tax, and each band applies only to the slice of income within that range.

Understanding your tax liability helps you make informed decisions about pension contributions, salary sacrifice, gift aid donations, and other tax-efficient strategies. This tool provides an estimate based on standard tax codes, though your actual position may differ if you have multiple income sources or special circumstances.

Key Information for 2025/26

The personal allowance is £12,570 (frozen until 2028). Basic rate: 20% on income from £12,571 to £50,270. Higher rate: 40% on income from £50,271 to £125,140. Additional rate: 45% on income above £125,140. The personal allowance reduces by £1 for every £2 earned above £100,000, creating an effective 60% rate between £100,000 and £125,140.

Example Calculation

On £42,000 annual income: £12,570 is tax-free, then £29,430 is taxed at 20% = £5,886 income tax. National Insurance adds £2,354 at 8% on earnings above £12,570. Total deductions: £8,240, leaving take-home pay of £33,760 per year or £2,813 per month.

Source: Based on official HMRC 2025/26 tax rates. Last updated March 2026.

Frequently Asked Questions

Has the FHL regime been abolished?

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.

What were the FHL qualifying conditions?

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.

What tax advantages did FHL status give?

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.

What happens to my FHL property from 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.

Should I consider selling my former FHL 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.

Can I use a limited company for holiday letting after FHL abolition?

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.

What records do I need for rental property tax after FHL abolition?

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).

Mustafa Bilgic

UK Tax & Property Finance Specialist. Mustafa provides practical HMRC-aligned guidance on FHL taxation, abolition planning, and the transition to standard BTL treatment. Updated: 20 February 2026.

Related Calculators

Official Sources

Data verified against official UK government sources. Last checked April 2026.