Answers · UK 2025/26
How are former Furnished Holiday Lets taxed after April 2025?
The Furnished Holiday Lettings (FHL) tax regime was abolished from 6 April 2025. Properties that previously qualified as FHLs are now treated as standard residential rental properties: no capital allowances on furniture, no Business Asset Disposal Relief on sale, no ability to use profits for pension contribution calculations, and Section 24 mortgage interest restriction applies.
Full answer
The Furnished Holiday Lettings (FHL) tax regime, which gave short-term holiday rental properties access to a range of tax advantages normally reserved for trading businesses, was abolished with effect from 6 April 2025 (as announced at Spring Budget 2024). **What has been lost since April 2025** 1. **Capital allowances**: FHLs could claim capital allowances (including AIA) on furniture, fittings, and equipment. Post-April 2025, only the replacement of domestic items relief (like standard buy-to-let) is available. 2. **Business Asset Disposal Relief (BADR)**: FHL owners could claim BADR on disposal, paying CGT at 10% (now 18% under 2024 reforms) on gains up to £1 million lifetime limit. From April 2025 sales are taxed as residential property: 18%/24%. 3. **Pension contribution base**: FHL profits counted as "relevant UK earnings" — allowing contributions to personal pensions up to 100% of FHL profit. Standard rental income does NOT count as relevant earnings, so pension relief is now restricted to other earned income. 4. **Loss treatment**: FHL losses could be offset against FHL profits from other properties. Now rental losses from all UK property (except commercial) are pooled in the UK property business and can only offset other UK property income. 5. **Spouse income splitting**: FHLs allowed flexible income allocation between spouses regardless of legal ownership shares. Now HMRC's Form 17 rules apply — income splits according to legal ownership. **What remains unchanged** - Rental income is still taxable as property income - Allowable revenue expenses (agent fees, insurance, repairs) are still deductible - Section 24 mortgage interest restriction now applies - CGT 60-day reporting rule on disposal applies **Transitional point** Assets on which capital allowances were claimed before April 2025 transition into the property business — any unrelieved balancing charges or allowances are dealt with in the final FHL return for 2024/25.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.