Answers · UK 2025/26
How is a Furnished Holiday Let (FHL) taxed after April 2025 in the UK?
From April 2025, the Furnished Holiday Let (FHL) tax regime was abolished. FHL properties are now taxed as ordinary residential lettings. Special FHL benefits -- including full mortgage interest relief, capital allowances, pension contribution treatment, and BADR -- no longer apply.
Full answer
The Furnished Holiday Let (FHL) regime, which gave short-term holiday rental properties preferential tax treatment, was abolished from 6 April 2025. What changed: 1. Finance costs: FHL landlords previously could deduct 100% of mortgage interest against rental profit. From April 2025, they are subject to the same restriction as other residential landlords -- a basic rate (20%) tax credit only, regardless of their marginal tax rate. 2. Capital allowances: FHL properties could claim capital allowances on furniture, equipment, and fixtures. Ordinary residential lettings cannot. Post-April 2025, FHL properties can no longer claim capital allowances (the replacement of domestic items relief applies instead, as with standard lettings). 3. Pension contributions: FHL profits previously counted as 'relevant UK earnings' for pension annual allowance purposes. From April 2025, rental income (including former FHL income) does not count as earned income for pension purposes. 4. Business Asset Disposal Relief (BADR): FHL disposals previously qualified for BADR (10% CGT, now 18% from October 2024). Post-abolition, they are treated as residential property disposals attracting 18% (basic rate) or 24% (higher rate) CGT. 5. Business rates / council tax: Many FHL properties shifted to business rates and small business rate relief. Local authorities now assess eligibility more strictly. Transitional rules: Capital allowances pools opened before April 2025 can continue to be written down. Mixed-use properties (part FHL, part other) must be apportioned carefully. Owners of former FHL properties should review their tax position and consider whether continued short-term letting remains commercially viable under the new rules.
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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.