The Furnished Holiday Lettings (FHL) regime was abolished with effect from 6 April 2025. So, what does this mean for your holiday let?

Your property will now form part of either your main UK or overseas property business. As a result, a number of advantageous tax treatments previously available under the FHL rules will no longer apply. Key changes include:

  • Tax relief for interest on loans related to the dwelling will be limited to the basic rate of 20%.

  • New capital expenditure will typically not qualify for capital allowances. Instead, relief may be available under the replacement of domestic items rules.

  • Capital Gains Tax reliefs available for trading businesses—such as Business Asset Disposal Relief, Gift Relief, and Rollover Relief—will no longer be applicable.

  • Income from the property will cease to count as ‘relevant UK earnings’ when determining eligibility for pension contribution relief.

That said, there are transitional provisions in place that could offer some continued benefits:

  • Losses generated from an FHL business prior to 6 April 2025 can be carried forward and offset against future profits of the UK or overseas property business, as appropriate.

  • Where a capital allowances pool existed in an FHL business at 5 April 2025, it may be carried forward into the general property business, with writing-down allowances continuing to apply.

  • Business Asset Disposal Relief (BADR) may still be claimed where an FHL business ceased before 6 April 2025, provided the disposal occurs within three years of cessation and other conditions are met.

If your property previously qualified as an FHL and you’re unsure how the new rules affect you, please don’t hesitate to get in touch.