Answers · UK 2025/26
What tax reliefs replaced Furnished Holiday Let reliefs after April 2025?
There are no direct replacements for the Furnished Holiday Let (FHL) tax reliefs abolished from 6 April 2025. Former FHL properties are now taxed as ordinary residential lettings: mortgage interest is restricted to a 20% tax credit, and Business Asset Disposal Relief, Capital Allowances on plant, and pension contribution credits no longer apply.
Full answer
The Furnished Holiday Let tax regime was abolished with effect from 6 April 2025 (announced in Spring Budget 2024 and legislated in Finance (No.2) Act 2024). All properties that previously qualified as FHLs are now treated as ordinary residential rental properties. What the FHL regime previously provided -- Full deduction of mortgage interest (not subject to Section 24 restriction) -- Capital allowances on furniture, equipment and integral features (not available to normal residential lettings) -- Qualifying income for pension contribution purposes (FHL income counted as "relevant UK earnings") -- Business Asset Disposal Relief (BADR) on sale at 10% CGT (now 14% from 6 April 2025 / 18% from 6 April 2026) -- Rollover relief on reinvestment of proceeds into new qualifying business assets -- Business Property Relief for IHT purposes (though HMRC often challenged this) What applies from 6 April 2025 -- Mortgage interest: restricted to 20% basic-rate tax credit (S24 ITTOIA 2005) -- the same as other buy-to-let residential properties -- Capital allowances: no longer available; the Replacement of Domestic Items relief applies instead (like-for-like replacement only) -- Pension contributions: FHL income no longer counts as relevant UK earnings, so the qualifying earnings limit for pension contributions is reduced for those with no other earned income -- CGT on sale: standard residential CGT rates (18% / 24%) and no BADR -- IHT: no BPR for investment-type rental properties Transitional rule HMRC applied a "snapshot" test at 31 March 2025: properties that met the FHL qualifying criteria on that date may have certain transitional protections. However, for most tax purposes the change is immediate from 6 April 2025. Impact on owners Higher and additional-rate taxpayers with mortgage debt are most affected. The effective tax rate on profits rises materially. Many owners are reviewing whether to sell, restructure into a company, or convert to long-term letting.
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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.