Glossary · UK
What is Furnished Holiday Lettings (FHL)?
A former special tax status for qualifying short-term holiday let properties, giving access to certain business tax reliefs not available to ordinary residential lets, abolished from April 2025 so all lets are now taxed under the same property income rules.
Full Definition
Furnished Holiday Lettings (FHL) was a special tax status that applied to properties let out furnished on a short-term commercial basis to holidaymakers, provided the property met three qualifying tests within the tax year: it had to be available for letting to the public for at least 210 days, actually let commercially for at least 105 days, and not normally occupied by the same tenant for more than 31 continuous days for more than 155 days in the year (to exclude what was, in substance, a longer-term letting dressed up as a holiday let). Properties meeting these tests received several tax advantages not available to ordinary residential lettings. The main benefits of FHL status, while it existed, included the ability to claim full mortgage interest relief as a deduction against rental profits (rather than the restricted 20% tax credit that applies to ordinary residential landlords since 2020), access to capital allowances on furniture, fixtures, and equipment within the property, eligibility for Business Asset Disposal Relief (reducing Capital Gains Tax to 18% for 2026/27, rather than the standard residential property rates of up to 24%) on sale of a qualifying FHL business, and the ability to count FHL profits as relevant earnings for pension contribution purposes. The FHL regime was abolished with effect from 6 April 2025, following an announcement in the March 2024 Budget, meaning furnished holiday letting properties are now taxed under the same rules as any other residential property letting business -- mortgage interest relief is restricted to the 20% basic-rate tax credit, capital allowances on furnishings are no longer available (though the replacement domestic items relief, allowing a deduction for the cost of replacing furnishings, still applies as it does to ordinary rentals), and Business Asset Disposal Relief is no longer available on disposal. Landlords who previously ran qualifying FHL businesses should review their overall tax position following the change, since the loss of full mortgage interest relief in particular can significantly increase the tax due on properties financed with a large mortgage.