What happens to unused Furnished Holiday Lettings losses after the FHL rules were abolished?

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The abolition of the beneficial Furnished Holiday Lettings (FHL) tax regime from 6 April 2025 raised an important transitional question for landlords who had built up unused tax losses under the old rules: what happens to those losses once FHL as a distinct tax category no longer exists? **FHL losses do not simply vanish** HMRC's transitional rules preserve unused FHL losses carried forward from before the abolition date -- they are not simply written off or lost. Instead, these losses carry forward and become available to set against the landlord's ongoing UK property business income going forward, under the same general property income loss rules that apply to any other landlord. **Merging FHL and non-FHL property businesses** Before April 2025, FHL properties were treated as an entirely separate trade/property business from a landlord's other, ordinary (non-FHL) rental properties, with losses generally ring-fenced to only be used against FHL income specifically. After abolition, all UK property income (previously-FHL and previously-non-FHL) is merged into a single UK property business for tax purposes going forward. This means a landlord's carried-forward FHL losses can now, in principle, be used against the income from what was previously their SEPARATE ordinary rental portfolio too, since there is no longer a distinction between the two for post-abolition years. **Worked example** A landlord had built up £15,000 of unused FHL losses from a holiday cottage over several years before April 2025 (perhaps from a period of high mortgage interest costs or a major refurbishment claimed against FHL income). Before abolition, this £15,000 loss could only be set against FUTURE FHL income from that same cottage or another FHL property, not against the landlord's separate, ordinary buy-to-let flat income. From April 2025 onwards, because both types of property income are now merged into one single UK property business, the same £15,000 carried-forward loss can be set against the combined income from BOTH the former holiday cottage AND the ordinary buy-to-let flat, provided it is used against the correct category of income under the transitional rules (some restrictions may still apply to how losses generated under the old FHL capital allowances regime interact with the new simplified capital allowances treatment). **What is genuinely lost, not just transitioned** While the losses themselves carry forward, some of the SPECIAL FHL tax advantages that existed alongside the loss rules are genuinely gone for good from April 2025 -- full mortgage interest deductibility (rather than the 20% tax credit restriction other landlords face under Section 24), access to certain capital allowances on furniture and equipment (rather than the more restricted 'replacement of domestic items' relief other landlords use), and FHL income counting as relevant UK earnings for pension contribution purposes. These benefits do not carry forward in any form -- only the previously-accrued LOSSES themselves survive the transition. **Why landlords should review their position** Former FHL owners with carried-forward losses should specifically check with an accountant how those losses interact with their current, merged property business, since the transitional rules involve some technical detail about which losses can offset which types of income and in what order -- simply assuming the losses have been lost entirely (or, conversely, assuming they now offset absolutely any income without restriction) could both lead to under-claiming or incorrectly claiming relief on a Self Assessment return.

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