The Furnished Holiday Let (FHL) regime was abolished from 6 April 2025. Properties that previously qualified as FHLs are now treated as standard residential lettings for tax purposes. The generous tax treatment that made FHLs attractive (Capital Allowances, pension contribution eligibility, Business Asset Disposal Relief) no longer applies from 2025/26 onwards.

Major change: FHL regime abolished April 2025

If you own a holiday let, the information below reflects the position from 2025/26 onwards. Guides published before April 2025 may describe the old FHL rules, which no longer apply.

What was the FHL regime?

Before April 2025, a property that met the FHL qualifying conditions benefited from:

  • Capital Allowances: On furniture, equipment, and fixtures (not available for ordinary residential lettings)
  • Business Asset Disposal Relief (BADR): 10% CGT rate on sale (instead of 24%)
  • Pension contribution relief: FHL profits counted as relevant UK earnings for pension contribution purposes
  • Rollover relief: Able to defer CGT by reinvesting proceeds into another business asset

What applies from April 2025?

Holiday lets are now taxed in exactly the same way as other residential rental properties:

  • No Capital Allowances on furnishings (Replacement of Domestic Items Relief applies instead)
  • CGT at 18% or 24% on sale (no BADR at 10%)
  • FHL profits no longer count towards relevant UK earnings for pension contributions
  • No loss ring-fencing between FHL and other rental income (all UK property income is pooled)
  • Section 24 mortgage interest restriction applies

Transitional provisions

Capital Allowance claims already in progress for qualifying FHL expenditure were allowed to continue under transitional rules. If you were claiming writing-down allowances on a pool, seek specialist advice on how these transition to the new regime.

The impact on Airbnb and short-term let owners

Many short-term let landlords had structured their properties to meet the old FHL qualifying conditions specifically for the tax advantages. With those advantages gone, the calculus for short-term vs long-term letting has changed significantly for some owners. The economics of each letting strategy should be revisited with an accountant.

What qualifying conditions existed under the old regime?

For reference, the old FHL regime required:

  • The property to be available to let commercially for at least 210 days in the tax year
  • The property to actually be let for at least 105 days in the tax year
  • No single letting to exceed 31 consecutive days for the property to count as an FHL

These conditions no longer have any tax significance from 2025/26 onwards.

Disclaimer

This guide is for general information only. Property taxation is complex and frequently changes. Always consult a qualified tax adviser or accountant before making decisions. Find one via our accountant directory.