What replaced the Furnished Holiday Let tax regime in 2025?

Full answer

The Furnished Holiday Let (FHL) regime was a set of tax rules that gave favourable treatment to short-term holiday rental properties. HMRC abolished the regime with effect from 6 April 2025 for income tax and CGT purposes (and from 1 April 2025 for corporation tax). What changed: Under the old FHL regime, qualifying properties benefited from several advantages that standard residential landlords could not access: - Profits counted as earnings for pension contribution purposes - Capital allowances could be claimed on furniture and fixtures - Business Asset Disposal Relief (BADR) was available on sale, meaning CGT was charged at a lower rate - Interest costs were fully deductible against rental profits - Rollover relief and gift relief were available for CGT From 6 April 2025, all of these reliefs ceased for FHL properties. Former FHL properties are now taxed in exactly the same way as standard residential rental properties: - Finance costs (mortgage interest) are restricted to a 20% basic rate tax reducer, not a full deduction - Capital allowances on furniture are replaced by the Replacement of Domestic Items relief - BADR is no longer available on sale; standard CGT rates of 18%/24% apply (with BADR now only available at 18% up to GBP 1 million for qualifying business assets) - Profits no longer count as earnings for pension relief purposes Transitional rules: HMRC introduced anti-forestalling provisions to prevent accelerated claiming of reliefs before the abolition date. Losses generated under the FHL regime before April 2025 can be carried forward and offset against future profits from the same property, but only against the general property business income going forward. Landlords who previously relied on FHL tax treatment should review their position with a tax adviser, particularly regarding CGT planning on any planned sale and pension contribution eligibility.

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