From 6 April 2025, the Furnished Holiday Lettings (FHL) tax regime has been abolished. If you rent out a holiday property, here’s what that means for you.

What changes now FHLs are gone?

Your holiday property will now be treated as part of your regular UK or overseas property business. That means you’ll no longer benefit from certain tax advantages that applied under the FHL rules. Key changes include:

• Loan interest on the property will only qualify for basic rate tax relief (20%).
• You won’t be able to claim capital allowances on new spending (like furniture or appliances). Instead, you might be able to use the replacement of domestic items relief.
• You’ll lose access to Capital Gains Tax reliefs that were available for trading businesses, like Business Asset Disposal Relief, Gift Relief, and Rollover Relief.
• Income from the property will no longer count towards your ‘relevant UK earnings’, which may reduce the amount you can pay into a pension with tax relief.

Is there any help during the transition?

Yes, there are some transitional rules that may still help you:

• Losses from your FHL business before 6 April 2025 can still be used. You can carry these losses forward and use them against profits from your UK or overseas property business in future years.
• If you had a capital allowances pool on 5 April 2025, this can be carried forward, and writing-down allowances can still be claimed over time.
• If you stopped your FHL business before 6 April 2025 and the property met the FHL rules at the time, you may still qualify for Business Asset Disposal Relief, as long as you sell within 3 years of stopping the business.

If your property used to qualify as a Furnished Holiday Let and you’re unsure how these changes affect you, please get in touch and we’ll be happy to help.