How Are Furnished Holiday Lets Taxed?

FHL stands for furnished holiday let. It was a short-term holiday property that passed HMRC's availability and letting tests and came with its own tax rules. Those rules were abolished on 6 April 2025 for income tax and capital gains tax, and on 1 April 2025 for corporation tax.

Former UK holiday lets now form part of your UK property business, and former EEA holiday lets form part of your overseas property business.

For individual landlords, relief for finance costs on residential holiday lets is now restricted to a basic-rate tax reduction, subject to limits. Companies are not subject to this restriction.

Key takeaways

• The FHL tax regime ended on 6 April 2025 for income tax and capital gains tax, and on 1 April 2025 for corporation tax.
• Former UK FHLs form part of your UK property business and former EEA FHLs form part of your overseas property business. Carried-forward losses stay within the corresponding business.
• For individual landlords, finance cost relief is restricted to a basic-rate tax reduction, subject to limits. Companies are not subject to this restriction.
• Existing capital allowance pools keep their writing-down allowances, but new expenditure follows the normal property business rules.
• The old 210, 105 and 155 day tests still matter for 2024 to 2025 and earlier tax years, with different thresholds before 2012 to 2013.

What is a furnished holiday let (FHL)?

A furnished holiday let was a furnished property, in the UK or the European Economic Area, that you let commercially as holiday accommodation and that met HMRC's tests. The label no longer gives any tax treatment, but HMRC applied it to returns up to 5 April 2025.

Furnished meant guests could use enough furniture for normal occupation, such as beds, seating, dining furniture and storage. Commercially let meant you let it with a view to profit. Stays by friends and family at little or no cost did not count.

When did the FHL tax regime end?

The FHL rules stopped applying from 6 April 2025 for income tax and capital gains tax, and from 1 April 2025 for corporation tax and corporation tax on chargeable gains. The change was legislated in Schedule 5 to the Finance Act 2025. HMRC's policy paper on the abolition sets out the dates and the transitional rules. It is the source for the changes below. Read the HMRC policy paper on abolishing the furnished holiday lettings tax regime.

How are holiday lets taxed now?

Holiday lets are taxed in the same way as other rental property. Under HMRC's policy paper, income and gains from a former FHL form part of your property business and follow the same rules as every other property in it. Former UK FHLs form part of your UK property business. Former EEA FHLs form part of your overseas property business.

The table compares the old and new treatment across the five areas that changed.

In short, the tax advantages holiday let landlords had over other residential landlords have gone. Our guide to landlord tax rates, reliefs and changes covers the wider rules.

What happens to mortgage interest relief on a holiday let now?

For individual landlords, relief for finance costs on residential holiday lets is now restricted to a basic-rate tax reduction, subject to limits. Companies are not subject to this restriction. For most individuals the reduction is worth 20% of the interest, and it is the same finance cost restriction other individual landlords have faced, explained in our guide to Section 24 and mortgage interest relief.

The effect depends on your tax band. Here is a worked example for a holiday let earning £30,000 a year, with £8,000 of running costs and £10,000 of mortgage interest, for an individual taxpayer paying 40% on the whole profit.

The same holiday let costs this taxpayer £2,000 more in tax. In this simplified example, a taxpayer whose profits remain wholly within the basic-rate band pays the same tax, provided the full finance-cost reduction is available.

This example is illustrative. It applies to an individual, uses England, Wales and Northern Ireland rates, and ignores the personal allowance, other income and the income and profit limits on the reduction. It is not tax advice.

Can I still claim capital allowances on holiday let furniture?

Only on an existing pool. If you had a capital allowances pool when the regime ended, you can keep claiming writing-down allowances on that balance. New expenditure from 6 April 2025 follows the normal property business rules. Qualifying replacement furniture and domestic items may receive replacement of domestic items relief. Initial purchases do not qualify for that relief, and where a replacement improves on the original, the deduction can be restricted. Our guide to allowable expenses for landlords explains what you can claim.

What happened to capital gains tax reliefs on a holiday let?

Most of the reliefs FHL status gave access to have ended. HMRC's policy paper lists roll-over relief, business asset disposal relief (the former Entrepreneurs' Relief), gift relief, relief for loans to traders and the substantial shareholdings exemption. Transitional rules protect some claims.

For business asset disposal relief, the FHL business must actually have ceased before 6 April 2025, the other conditions must be met, and the disposal must fall within the normal three-year window. The abolition itself does not count as a cessation.

Otherwise, selling a former holiday let is now taxed like selling any other rental property. Our guide to capital gains tax on investment property explains the standard rules.

What else changed for former holiday let owners?

Four smaller changes follow from the abolition.

• Pensions: holiday let profits no longer count as relevant UK earnings when working out the maximum pension relief you can claim.
• Losses: unused FHL losses can be carried forward against future profits of the corresponding business. UK FHL losses go against your UK property business and EEA FHL losses against your overseas property business.
• Reporting: you no longer calculate FHL profits separately, because they sit within your property business.
• Joint ownership: married couples and civil partners who jointly own a former FHL are generally now taxed on a 50:50 split of the income. The exception is where they hold unequal beneficial interests, meet the conditions and submit a valid Form 17 declaration.

Do the old FHL tests still matter?

Yes, for the 2024 to 2025 tax year and earlier, and when you review an old return. A property had to pass three tests in each tax year to be an FHL. The figures below applied from 2012 to 2013. Before that, the availability and letting thresholds were 140 and 70 days.

• Availability: the property was available for commercial letting to the public for at least 210 days.
• Letting: it was actually let commercially for at least 105 days. Days let to friends and family at reduced rates did not count. Lets of more than 31 continuous days generally did not count either, with an exception for unforeseen circumstances.
• Pattern of occupation: lets of more than 31 continuous days could not total more than 155 days in the year.

Two elections helped properties that fell short on the letting test. An averaging election let you average occupancy across several FHLs, but not across UK and EEA properties together. A period of grace election could keep FHL status for up to two consecutive years, but only if the property had qualified in a previous year, you genuinely intended to meet the letting test, and it still met the availability and occupation tests. Both only matter now for earlier years.

What should former FHL owners check on their next return?

These are the points where the old and new rules differ, so they are the places a return is most likely to go wrong.

1. The right property business. Report former UK holiday lets with your UK property business and former EEA holiday lets with your overseas property business, not as a separate FHL business.
2. Finance costs. If you are an individual, claim finance costs as the basic-rate tax reduction rather than a deduction from profits. Companies are not subject to the restriction.
3. Capital allowances. Keep claiming writing-down allowances on any pool that existed at the change. Treat new expenditure under the normal property rules, and claim replacement of domestic items relief only for qualifying replacements.
4. Losses. Carry forward unused FHL losses against future profits of the same type of business, UK or overseas.
5. Joint ownership. If you own a former FHL with a spouse or civil partner, check whether income is now split 50:50, or whether a valid Form 17 declaration applies.
6. Pension contributions. Check that your relief does not rely on holiday let profits counting as earnings.
7. Sales. If you plan to sell, check with an accountant before assuming any trading relief applies.

HMRC's property income manual is the reference for how property income is calculated. If your position is not simple, speak to a qualified accountant.

Do holiday lets fall under Making Tax Digital?

They can. Making Tax Digital for Income Tax has been live since 6 April 2026 for landlords and sole traders with qualifying income over £50,000. The threshold falls to £30,000 from 6 April 2027 and £20,000 from 6 April 2028, subject to exemptions.

Qualifying income is your combined gross self-employment and property income before expenses, measured using an earlier tax return. Holiday let income counted towards that figure before the abolition as well.

Our guides explain Making Tax Digital for landlords and how Making Tax Digital for Income Tax works.

Frequently Asked Questions

What does FHL stand for?

FHL stands for furnished holiday let. It described a furnished property let short-term as holiday accommodation that met HMRC's availability, letting and pattern of occupation tests. The label no longer carries any tax treatment.

Does furnished holiday let status still exist?

Not for tax. The FHL tax regime was abolished from 6 April 2025 for income tax and capital gains tax. You can still call a property a holiday let, but it is taxed like any other property in your UK property business, or your overseas property business for a former EEA property.

Is mortgage interest still tax deductible on a holiday let?

Not in full for individuals. For individual landlords, relief for finance costs on residential holiday lets is now restricted to a basic-rate tax reduction, subject to limits. Companies are not subject to this restriction. Before the change, FHLs were exempt from it.

Can I carry forward losses from my FHL business?

Yes. HMRC's policy paper says losses from your FHL business can be carried forward and set against future profits of the corresponding UK or overseas property business.

Does stamp duty on a holiday let depend on FHL status?

No. The FHL regime covered income tax, capital gains tax, corporation tax and capital allowances, so it never set stamp duty rules. Our guide to stamp duty on buy-to-let and additional properties explains what applies when you buy.

How can you keep holiday let records straight after the change?

Keep income and costs for each property separately, even though profits are now pooled. You still need the property-level detail to work out finance costs, replacement furniture claims and any loss you carry forward.

Landlord Studio tracks income and expenses by property, and is recognised by HMRC as Making Tax Digital software. See how rental accounting works, or compare MTD software for landlords.

Disclaimer: This blog is for general informational and educational purposes only and should not be used as a substitute for competent legal, tax or other advice from a licensed professional.