The Furnished Holiday Lettings (FHL) regime is gone. From 6 April 2025 (1 April for companies), short-stay lets are taxed like any other residential rental. The government’s policy and clarifications confirm four big shifts: interest relief capped at basic rate, no capital allowances on new spend (use “replacement of domestic items” instead), no CGT trader-style reliefs, and FHL profits no longer count as “relevant earnings” for pension contributions.
Capital gains: goodbye 10% exits
Business Asset Disposal Relief (BADR), roll-over and hold-over reliefs no longer apply to disposals of FHL property made now. (There was a narrow transitional route for BADR where the FHL business ceased by 5 April 2025 and disposal follows within the normal window—facts and conditions apply.) Standard residential CGT rates apply: 18% (basic-rate) / 24% (higher/additional-rate).
Income & expenses: back to standard property rules
- Mortgage interest/finance costs: now a 20% tax credit not a deduction.
- Capital allowances: no new claims for furniture/fixtures. Instead use Replacement of Domestic Items Relief for like-for-like replacements. (Existing capital-allowances pools at 5 April 2025 can continue to be written down.)
- Losses: pre-abolition FHL losses now fold into your UK or overseas property business and can be used there (subject to the usual continuation rules).
Pensions: mind the “relevant earnings” trap
From 6 April 2025, FHL profits no longer count as “relevant UK earnings”. If you were using FHL income to justify personal pension contributions, check your capacity now (you may be limited to £3,600 gross if you have no other relevant earnings).
Joint owners: default splits bite again
Post-abolition, income splits follow standard property rules. For spouses/civil partners, it’s 50:50 by default unless beneficial ownership is unequal and you file Form 17 so profits match that ownership. If you ran unequal splits pre-2025, make sure your paperwork still supports it.
Business rates vs council tax (separate to FHL)
Local rating hasn’t changed because of the tax abolition. Whether you pay business rates or council tax still depends on availability/letting days (e.g., typically available 140 days and actually let 70 days in the prior 12 months for business rates England & Scotland). Check your local authority/VOA position.
Quick actions we recommend
- Update forecasts for CGT and income tax (no BADR/roll-over; interest relief capped).
- Review pension planning if FHL profits previously propped up “relevant earnings”.
- Tidy ownership docs (deeds/beneficial shares) and file Form 17 where needed.
- Refresh your capex policy: use replacement-of-domestic-items relief and keep receipts.
And for all landlords: MTD is coming up fast
From 6 April 2026, if your gross property/trading income (not your profit) is over £50,000, you must use Making Tax Digital for Income Tax; from 6 April 2027, the threshold drops to £30,000. (Government plans to legislate for £20,000 from 2028.) Using software now helps: live bank feeds, easy receipt capture, fewer typos, and ready-to-file quarterly updates when MTD kicks in.
Back to You are not Immortal – a practical guide to a delicate topic – IHT
