Furnished Holiday Letting Tax UK 2026/27: Life After the FHL Regime Abolition
The furnished holiday letting tax regime was abolished from April 2025, moving holiday-let landlords onto standard property income rules. Full worked example on a £28,000 holiday let and what actually changed.
What actually changed on 6 April 2025
For years, furnished holiday lets enjoyed a distinct, more generous tax regime than standard residential rentals: full deductibility of mortgage interest against rental income, capital allowances on furnishing costs, and access to certain Capital Gains Tax reliefs (including Business Asset Disposal Relief) normally reserved for trading businesses. All of that was withdrawn from 6 April 2025, folding holiday lets into the same tax treatment as any other residential letting — including the Section 24 mortgage interest restriction that standard buy-to-let landlords have lived with since 2017-2020.
Rental Yield Calculator
Calculate gross and net rental yield for buy-to-let properties.
Open Rental Yield calculatorWorked example: £28,000 rental income, geared holiday let
Rental income: £28,000
Allowable running costs (cleaning, management fees, insurance, utilities during void periods): £8,000
Mortgage interest paid (no longer directly deductible): £6,000
Taxable rental profit (before mortgage interest relief): £28,000 − £8,000 = £20,000
Income tax at 20% (assuming basic-rate taxpayer): £20,000 × 20% = £4,000
Mortgage interest tax credit (20% of £6,000): −£1,200
Net tax liability: £4,000 − £1,200 = £2,800
Cash left after mortgage interest and running costs and tax: £28,000 − £8,000 − £6,000 − £2,800 = £11,200
Under the old FHL rules, the £6,000 mortgage interest would have been deducted directly from income before calculating tax, producing a lower taxable profit of £14,000 and income tax of £2,800 at basic rate with no separate credit needed — broadly similar at basic rate, but the gap widens sharply for higher-rate taxpayers, since the 20% credit doesn't scale up with the tax rate the way a direct deduction would.
BTL Section 24 Impact Calculator
Compare your buy-to-let tax position under old rules (pre-2017) versus current Section 24 rules where mortgage interest is no longer deductible.
Open Section 24 Impact calculatorWhy higher-rate landlords feel this most
The Section 24 mechanism — a flat 20% credit regardless of your marginal tax rate — hits higher and additional-rate taxpaying landlords hardest, since they'd previously have saved 40% or 45% tax on mortgage interest through a direct deduction, but now only get the 20% credit back. Holiday-let landlords who were higher-rate taxpayers and geared with a mortgage have seen some of the largest effective tax increases from the abolition.
What's unchanged
Ordinary running costs — cleaning, management fees, insurance, letting agent commission, utility bills during voids, repairs and maintenance — remain fully deductible against rental income exactly as before, since these were never unique to the FHL regime.
Filing and paying
Report holiday-let income on the property pages of your Self Assessment return, applying the standard property income rules (with the mortgage interest restricted to a 20% credit rather than a direct deduction), and file online by 31 January following the tax year end.
uk-furnished-holiday-let-abolition-guide-2026Frequently asked questions
When was the furnished holiday letting tax regime abolished?
The FHL tax regime was abolished from 6 April 2025, removing the special tax advantages that previously applied to qualifying holiday lets — full mortgage interest deduction, capital allowances on furnishings, and access to certain capital gains reliefs like Business Asset Disposal Relief. From that date, holiday lets are taxed under the same rules as any other residential rental property.
What's the biggest practical change for holiday-let landlords since the abolition?
The loss of full mortgage interest deductibility is usually the biggest impact — holiday-let landlords with a mortgage now face the same Section 24 restriction as standard buy-to-let landlords, where mortgage interest is no longer deducted from rental income before tax, but instead gives a 20% basic-rate tax credit against the tax bill, which can push some geared holiday-let owners into a higher effective tax rate than before.
Can holiday-let owners still claim capital allowances on furniture and equipment?
No. Capital allowances on furnishing a holiday let (previously a distinctive advantage of the FHL regime over standard residential lettings) were withdrawn alongside the rest of the FHL regime from April 2025. Furnished holiday lets now follow the same rules as other residential property, which generally means no capital allowances on furnishings, though the replacement of domestic items relief may still apply.
How much tax does a holiday-let landlord pay now on £28,000 rental income?
With mortgage interest of, say, £6,000 no longer deductible from income (instead giving a 20% tax credit of £1,200) and other allowable costs of £8,000, taxable rental profit before the credit would be roughly £14,000, giving income tax of about £2,800 at basic rate before the £1,200 mortgage interest credit is applied, for a net liability of around £1,600 — noticeably more than under the old FHL rules where the full £6,000 interest would have been deducted upfront.
Does the abolition affect Capital Gains Tax when selling a former holiday let?
Yes — holiday lets sold after the abolition generally lose access to Business Asset Disposal Relief (which gave a reduced CGT rate) unless specific transitional or anti-forestalling provisions applied to a sale that straddled the abolition date. Standard residential property CGT rates now apply on disposal.
Try the calculators
Rental Yield Calculator
Calculate gross and net rental yield for buy-to-let properties.
BTL Section 24 Impact Calculator
Compare your buy-to-let tax position under old rules (pre-2017) versus current Section 24 rules where mortgage interest is no longer deductible.
Self-Employed Tax Calculator
Calculate income tax, Class 2 and Class 4 National Insurance for self-employed and sole traders for 2025/26.
Related reading
Buy-to-Let Landlord Summer Checklist 2026: 5 Financial Tasks for July–August
Five essential financial tasks for UK landlords in July and August 2026 — from the Self Assessment payment on account deadline to Section 24 planning, stress testing your mortgage, and whether a limited company structure makes sense.
Buy-to-Let Tax After Section 24: What Landlords Pay in 2026
Section 24 removed mortgage interest as a deductible expense for landlords. Higher-rate taxpayers now face far higher tax bills than they did before 2017. Here is exactly how the numbers work.
Buy-to-Let in a Limited Company UK 2026: Is It Worth the Extra Admin?
Section 24 has made personal buy-to-let more expensive for higher-rate taxpayers. But does a limited company actually save you money after corporation tax, extraction costs, and higher mortgage rates? A full 2026 comparison.