Furnished holiday let tax rules ended in April 2025: what it means for your holiday let
The furnished holiday let (FHL) tax regime ended in April 2025. What changed for mortgage interest, capital allowances, pensions and selling, and whether short letting still makes sense.
For years, holiday lets that met the "furnished holiday let" (FHL) tests had special tax treatment. That ended in April 2025. If you own a holiday cottage, coastal flat or city short let, here is what changed in plain English.
This is general information, not tax advice. Your accountant should check your own position.
The dates
- 6 April 2025 for income tax (individuals and partnerships).
- 1 April 2025 for corporation tax (companies).
From then on, holiday let income is treated as part of your ordinary property business, the same as long-term rentals.
What changed
| Before (FHL rules) | Now | |
|---|---|---|
| Mortgage interest (individuals) | Fully deducted from profit | 20% basic-rate tax credit only |
| Capital allowances on furniture and equipment | Could be claimed | No new claims; existing pools can keep running down. Replacement of domestic items relief applies instead |
| Pension contributions | Profits counted as earnings | Profits no longer count as relevant earnings |
| Selling (capital gains reliefs) | Business Asset Disposal Relief and rollover relief possible | No longer available |
| Losses | Kept separate | Pooled with your other UK property income |
The biggest hit is for higher-rate taxpayers with a mortgage, because mortgage interest is no longer fully deductible.
What didn't change
- Business rates vs council tax. That depends on how many nights you make the property available and actually let it, not on income tax. See our business rates guide.
- You still need to run it properly. Safety certificates, insurance and consents all still apply.
- Short stays can still earn more gross. In many areas, nightly income is still higher than a long-term rent. The question is the net figure.
What owners are doing now
- Re-running the numbers after tax, not just before. Use our free income estimate as a starting point, then ask your accountant to apply your tax rate.
- Cutting costs that eat into net profit, for example high management fees or poor pricing. Our guide to Airbnb management fees shows what's typical.
- Reviewing ownership. Some owners ask whether personal or company ownership suits them better. That's a decision for a qualified tax adviser.
- Considering guaranteed rent. If you'd rather have a fixed monthly amount, guaranteed rent removes the ups and downs, though you give up some of the upside.
Bottom line
The FHL changes made holiday lets less tax-efficient, especially for mortgaged, higher-rate owners. They didn't make short letting illegal or unprofitable. A well-run property in the right location can still beat a long let. Compare both honestly with our Airbnb vs long let guide.
Thinking of letting your property short-term?
We manage Airbnb, serviced accommodation and holiday lets across England and Wales, from city flats to countryside cottages and hotels. See what yours could earn.
This guide is general information, not legal, tax or financial advice. Rules change, so check GOV.UK, GOV.WALES or a qualified adviser before you act.