Comparison Β· Property Β· 2026/27
Furnished Holiday Let (Post-Abolition) vs Standard Rental Property
The Furnished Holiday Lettings (FHL) tax regime was abolished from 6 April 2025. A property that used to qualify as an FHL is now taxed exactly like a standard rental property β the same Section 24 restriction, the same Capital Gains Tax rates, and no more capital allowances or Business Asset Disposal Relief. This guide sets out what changed and what, if anything, still differs for 2026/27.
Key Change: FHL Regime Abolished 6 April 2025
- β’ Section 24 now applies to former FHLs β mortgage interest gives only a 20% tax credit, same as standard rentals
- β’ Capital allowances ended β only Replacement of Domestic Items Relief remains, same as standard rentals
- β’ BADR no longer available on sale β gains taxed at the standard 18%/24% residential CGT rates in 2026/27
- β’ No longer a trade for pension contribution purposes, same as standard rentals
- β’ What remains different is purely commercial: gross income, occupancy, management burden and insurance β not tax
Side-by-Side: Former FHL vs Standard Rental (Both Post-Abolition)
| Feature | Former FHL (from Apr 2025) | Standard Rental Property |
|---|---|---|
| Section 24 mortgage interest restriction | Applies (20% credit only) | Applies (20% credit only) |
| Capital allowances on furniture | No β replacement relief only | No β replacement relief only |
| CGT rate on sale (2026/27) | 18% / 24% | 18% / 24% |
| Business Asset Disposal Relief | No longer available | Never applied |
| Counts as a trade for pensions | No longer | Never |
| Typical gross income | Often higher (short-term, seasonal) | Baseline, more predictable |
| Management intensity | High β changeovers, cleaning, marketing | Lower β single tenancy |
| Mortgage/insurance product needed | Specialist holiday-let product | Standard buy-to-let product |
CGT figures shown are the 2026/27 residential rates from CalcHub's tax rate tables. Everything in the tax columns above is now identical between the two property types β only the commercial factors at the bottom still differ.
What Actually Changed on 6 April 2025
Before abolition, a qualifying FHL (meeting the availability, letting and pattern-of-occupation tests) sat in its own tax category with meaningfully better treatment than a standard rental: full mortgage interest deductibility instead of the Section 24 restriction, capital allowances on furniture and equipment, trade status for pension purposes, and Business Asset Disposal Relief on sale. From 6 April 2025, Finance Act 2024 removed that separate category entirely. There is no transitional lower-tax version of the FHL regime β a former FHL simply becomes an ordinary UK property business, taxed identically to any other rental property, from the first day of the 2025/26 tax year.
What Still Differs β Just Not Tax
Because the tax treatment has converged, the choice between running a property as a short-term holiday let or a standard long-term rental now rests entirely on commercial fundamentals. Holiday lets in popular destinations can still generate significantly higher gross income than an equivalent long-term rental, but that premium has to cover higher management fees, cleaning and consumables between guests, specialist insurance, seasonal income variability, and often planning restrictions on short-term letting. A long-term rental offers lower gross income but more predictable monthly cash flow and lighter management. Neither option benefits from a tax advantage the other lacks any more.