The accountants guide to the big FHL (furnished holiday let) tax changes 2025.

Big Tax Changes for Furnished Holiday Lets – What You Need to Know

If you own a Furnished Holiday Let (FHL) in the UK, brace yourself.

From 6 April 2025, the beloved (and let’s be honest, tax-efficient) FHL regime is being scrapped. Gone. Vanished. Just like your dream of retiring early on rental income.

Here’s what’s changing, and what you can do about it – other than scream into a cushion.

? What Was the FHL Regime?

The FHL rules allowed qualifying holiday lets to be treated differently from standard residential lets. More perks, less tax. Lovely. But from 6 April 2025, your holiday let will be treated like any other residential property for tax purposes.

RIP generous tax reliefs.

? Key Changes from April 2025

1. Mortgage Interest Relief Reduces

Previously, you could deduct mortgage interest in full from your rental income. From April 2025, you’ll only get a 20% tax credit, because apparently you didn’t need that relief anyway.

This hits higher and additional rate taxpayers hardest.

Thanks, HMRC.

2. Capital Gains Tax Reliefs Disappear

FHLs used to qualify for Business Asset Disposal Relief (BADR) and rollover relief.

Since April 2025, both are gone. Capital gains will be taxed at the standard (higher) residential rates.

Selling? You’ll need to plan ahead, especially with new anti-forestalling rules. If you exchanged contracts after 6 March 2024 but complete after 5 April 2025, tough luck – reliefs may be denied, especially if the transfer is to someone you know.

Cheers for that.

3. Capital Allowances – Also Gone

No more claiming allowances on furniture or fittings. From April 2025, you’re stuck with Domestic Items Relief – a deduction for replacing things like sofas and white goods. You can’t claim for initial purchases.

4. Profit Splitting Between Spouses

Used to split profits however you liked between you and your spouse? How very dare you. From April 2025, it’s 50:50 by default unless you complete a Form 17 AND actually own it unequally.

So you might want to check those ownership deeds before HMRC does it for you.

5. No More Pension Contribution Reliefs

FHL profits currently count as ‘relevant earnings’ for pension contributions. Since April 2025? Nope.

So if you were planning to turbocharge your pension with those profits, best think again, HMRC waits for no one.

6. Loss Relief Gets (Slightly) Better

One tiny silver lining: FHL losses can now be used against other rental income, not just from the same FHL. It’s the tax equivalent of being thrown a party popper after having your house burnt down.

7. Qualification Tests Disappear Too

No more letting tests, availability rules, or pattern of occupation conditions. You don’t need to meet any of those to qualify anymore – because there’s nothing to qualify for. Still, nice not having to count nights, right? Silver linings and all that.

? What Should You Do Now?

Here’s your post-abolition checklist:
– Reassess ownership if you’ve been splitting profits unequally.
– Speak to your accountant / bookkeeper about pensions and planning.
– Stay tuned – more guidance may follow.

? Final Thoughts

The FHL regime was nice while it lasted. Now it’s time to adjust, plan ahead, and make sure you’re not caught out.

We’re here to help if you want to talk it through (preferably before pouring a gin and weeping into your tax return).