As of 6 April 2025, the Furnished Holiday Lettings (FHL) regime has officially come to an end. While the change may have come as little surprise following previous announcements, the implications are significant—particularly for those who have benefitted from the generous tax treatment FHL status offered.
Here, we take a closer look at what the changes mean, what tax reliefs are now off the table, and what transitional rules are still available.
What’s Changed with Furnished Holiday Lettings?
With the abolition now in effect, any property previously qualifying as a Furnished Holiday Let is now simply treated as part of your wider UK or overseas property business. As such, many of the tax advantages previously available to FHLs have been withdrawn.
Key changes from April 2025:
- Loan interest relief is now restricted to the basic rate of 20%—similar to rules applying to standard rental properties.
- Capital allowances on new purchases of furnishings and equipment are no longer available. Instead, landlords may need to rely on the more limited replacement of domestic items relief.
- Capital Gains Tax (CGT) reliefs for trading businesses—such as Business Asset Disposal Relief (BADR), Gift Relief and Rollover Relief—can no longer be claimed on the sale of a property.
- Pension contributions can no longer be supported by FHL income. This income will no longer count as ‘relevant UK earnings’ for pension tax relief purposes.
Transitional Rules: Still Time to Act
Although the FHL rules are no longer in effect, there are some transitional measures in place that may still offer value—provided you act quickly and maintain clear records.
- Pre-April 2025 FHL losses can still be carried forward and used to offset future profits from the same type of property business (UK or overseas).
- Existing capital allowances pools as at 5 April 2025 can continue to be carried forward into the general property business. You may still claim writing-down allowances on these balances in future years.
- For CGT purposes, BADR may still apply if:
- Your FHL business ceased before 6 April 2025, and
- You sell the property within three years of cessation.
What Should You Do Now?
If you owned a qualifying FHL, it’s important to take proactive steps to protect your tax position and plan effectively for the future. Consider the following:
- Review your portfolio – Identify which properties were previously classified as FHLs and reassess your tax liabilities under the new rules.
- Plan capital expenditure carefully – With capital allowances no longer available on new purchases, the timing and necessity of major investments may need to be reconsidered.
- Revisit pension strategy – If you previously used FHL profits to justify pension contributions, you may need to review your funding plan to avoid excess contribution charges.
- Track pre-2025 losses and allowances – Maintain accurate records of any carried forward FHL losses or capital allowances pools, as these may still offer tax relief in future periods.
- Consider timing of property sales – If you are thinking of selling a former FHL, check whether the property sale may still fall within the three-year window for BADR.
Need advice?
Every property portfolio is different, and so are the tax implications. If you’re unsure how these changes affect your position—or if you’re planning to sell or reinvest—it’s worth having a conversation with your tax adviser sooner rather than later, so get in touch with us here at IN Accountancy.
And don’t forget to check out our YouTube channel for more tax and accounting tips!
