Guide to Furnished Holiday Let Tax Changes in 2025

As of 6th April 2025 (1st April 2025 for companies), the FHL tax relief regime has been abolished. As a result, the tax benefits associated with qualifying FHLs no longer apply. Instead, FHLs are taxed in the same way as long-term residential or commercial lets.

However, properties that qualified as FHLs in the 2024-25 tax year will still benefit from the previous rules regarding their tax return for that year. This must be submitted by 31st January 2026, if being completed online.

The Furnished Holiday Let tax regime allowed owners to benefit from specific tax advantages. In this blog, we outline the details around the Furnished Holiday Let (FHL) scheme, what its removal means for you, and other holiday let tax benefits you can still take advantage of.

Tax can be a complex subject and differs per individual case, so we always recommend you seek professional advice.

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Furnished Holiday Let tax guide 2025

Use the quick links to read about specific subjects, or continue reading our full Furnished Holiday Let tax guide.

• Furnished Holiday Let tax changes in 2025
• What is a Furnished Holiday Let?
• Furnished Holiday Let criteria
• What were the tax advantages of owning a Furnished Holiday Let?
• Which holiday let tax advantages still apply after April 2025?
• What if I did not meet Furnished Holiday Let occupancy levels in the 2024-25 tax year?
• Expert holiday home letting advice

If you would like more expert advice, or to find out more about letting your holiday home with Coast & Country Cottages, request a free Owner’s Guide today:

Click here to request an Owner’s Guide

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Furnished Holiday Let tax changes in 2025

The Furnished Holiday Let tax regime was removed on 6th April 2025, at the start of the 2025/2026 tax year. This means that certain tax advantages for holiday home owners will change.

For detailed and up-to-date information on furnished holiday let tax, read our parent company, Sykes Holiday Cottages’ update on Furnished Holiday Let tax changes. This guide is written by holiday home tax experts Zeal Tax, and includes all you need to know about the changes.

You can also find a breakdown of the changes on the Government website.

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What is a Furnished Holiday Let?

Furnished Holiday Let (FHL) was a specific category of short-term rental property classification in the UK, Ireland and other European countries. If your property was a Furnished Holiday Let, it allowed you, as an owner, certain tax advantages and benefits.

But how did your holiday home receive this status? To qualify as a Furnished Holiday Let, you needed to meet certain criteria which included annual bookings, rental availability and level of furnishing.

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Furnished Holiday Let criteria

Furnished Holiday Lets had a unique standing with taxation, and therefore gained certain benefits and allowances which are usually only available to normal trading businesses. A Furnished Holiday Let needed to meet the following criteria in order for you to qualify for special tax advantages.

1. Make a profit!

Your holiday let had to be actively promoted and let commercially, with the intent of making a profit. Using a holiday letting agency like Coast & Country Cottages is a fantastic way of ensuring you see positive returns on your investment, as we take care of all marketing, administration and bookings.

For more information on the services we offer, take a look at our blog on choosing a holiday home letting agency.

2. Availability and occupancy for your holiday let

There were three main conditions relating to the occupancy of your holiday let that had to be met in order to qualify:

1. Your property must be available for commercial holiday letting to guests and holiday makers for at least 210 days (30 weeks) per year.
2. Your property must be rented out as holiday accommodation to the public for at least 105 days (15 weeks) of the 210 days you have made it available. Lettings to the same person for over 31 days and time that you or your family use the property at a reduced or zero rate aren’t counted towards this total.
3. If your Furnished Holiday Let is rented out by the same person for more than 31 days, there must not be more than 155 days of this type of ‘long term’ occupation per year.

If you didn’t qualify for the occupancy requirements for the 2024-25 tax year, we explore what you need to do later in this article.

3. Furnish your holiday home

It goes without saying that your holiday home had to be adequately fitted out in order to qualify as a Furnished Holiday Let. There weren’t specifics on what needed to be provided, but furnishing your holiday cottage with the intent of making it a self-catering accommodation was a good benchmark.

One benefit of the Furnished Holiday Let tax regime was that owners could claim capital allowances on the cost of furnishing their holiday let. This meant they could offset these expenses against their rental income, reducing their income tax bill. We explore this topic in a bit more depth further on in the blog.

We understand that furnishing a holiday home can be a daunting task, so have a quick look for inspiration on our blog top 10 Devon brands for styling your holiday home.

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What were the tax advantages of owning a Furnished Holiday Let?

If your property met the required criteria, there were favourable tax benefits to help make your venture more profitable, and enable you to create an appealing, marketable holiday home.

The following were some of the benefits of having a property with Furnished Holiday Let status:

1. Furnished Holiday Let Capital Allowances

Under the FHL regime, owners could claim capital allowances on both moveable items like furniture and equipment, and on embedded fixtures such as heating systems, electrical wiring, kitchens, and bathrooms. These allowances helped reduce, or even eliminate, taxable profits in the early years of ownership.

Embedded fixtures included items such as water, electrical and heating systems, kitchens, bathrooms, carpets etc. This could have significantly reduced or eliminated your holiday letting taxable profits in the first few years.

In addition to capital allowances, HMRC allowed certain running costs to be deducted from your rental income as ‘allowable expenses’. These expenses must be incurred wholly and exclusively for the purposes of the rental business. This rule still applies now that the FHL scheme has ended, and we’ll explore it further later in this blog.

2. Capital Gains Tax relief

Capital Gains Tax (CGT) is charged on the profit made when you sell an asset that’s increased in value. When selling a Furnished Holiday Let, Owners had the added benefit of being able to claim Capital Gains Tax relief across the following areas:

a) Business Asset Rollover Relief

Business Asset Rollover meant you were able to delay paying Capital Gains Tax if you sold your property and used all or part of the proceeds to buy a new holiday home or invest in certain other qualifying assets.

b) Business Asset Disposal Relief

Business Asset Disposal Relief, (previously known as Entrepreneurs’ Relief) allows you to reduce the Capital Gains Tax (CGT) when you sell a ‘business asset’. The amount of tax you’d pay would be at the lower rate of 10% on all gains on qualifying assets, rather than the higher rates of 18% and 28% for individuals selling residential property.

c) Gift Hold-Over Relief

You may have been able to claim Gift Hold-Over Relief if you gave away your holiday home or sold it for less than it was worth to help the buyer. This means you wouldn’t have to pay Capital Gains Tax when you gave away your property, and the person you gave it to would only pay CGT (if any was due) when they sold.

3. Tax-advantaged pension contributions

You could make tax-advantaged pension contributions, as income generated from a Furnished Holiday Let was classed as ‘relevant earnings’.

The HMRC HS253 help guide has more information on this.

4. Split your tax with a partner

If you shared the ownership of your Furnished Holiday Let with a partner, you could portion the profit however you decide for tax purposes, regardless of the ownership split.

6. Mortgage interest rate relief

One advantage of the FHL regime was that mortgage interest on loans used to buy or improve your holiday let could be fully deducted from your rental income, reducing your taxable profit. This differed from standard residential lettings, where mortgage interest relief is restricted.

Now the FHL scheme has been abolished, holiday lets are treated the same as standard residential lettings, where owners receive a tax credit equal to 20% of your mortgage interest payments, rather than having taxable profits reduced by the full amount of mortgage interest paid.

Find out more about specialist holiday let mortgages in our blog.

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Which holiday let tax advantages still apply after April 2025?

Even though holiday home owners no longer benefit from the Furnished Holiday Let scheme, there are still some tax benefits available to take advantage of:

1. Allowable expenses for holiday lets

Although the Furnished Holiday Let (FHL) tax regime ended in April 2025, you can still claim allowable expenses to reduce the taxable profit from your holiday let. This is a rule that applies to all rental properties, and is separate from capital allowances.

To qualify, expenses must:

• Be wholly and exclusively for the commercial letting of your property
• Not be capital in nature (e.g. buying or building the property)

Examples of allowable expenses include:

• Utilities, heating, and refuse collection
• Cleaning, laundry, and housekeeping
• Advertising and letting agency fees
• Insurance, accountancy fees and loan interest (relief now limited to a 20% tax credit)
• Maintenance, gardening, and safety checks
• Travel to and from the property

If you use the property personally, you’ll need to apportion expenses between private and commercial use.

Read our blog on holiday let running costs for more tips on what expenses to expect.

Before making any big decisions, we would always recommend speaking to your accountant and to our knowledgeable in-house New Properties team, who would be delighted to offer advice and more comprehensive information.

2. Replacement of Domestic Items Relief

Although capital allowances cannot be claimed on new purchases made from April 2025, holiday let owners can still claim on replacing certain items, known as ‘Replacement of Domestic Items Relief’. Domestic items can include:

• Moveable furniture (sofas, tables, bed frames)
• Furnishings (carpets, rugs, carpets)
• Household appliances (fridges, freezers, washing machines)
• Kitchenware (crockery, utensils, cutlery)

3. Small Business Rates Relief

If your holiday let meets the minimum letting criteria, it may be assessed for business rates rather than council tax. this criteria is as follows:

• The property must be available for at least 140 days in any 12 month period
• The property must be let for 70 days in any 12 month period

In England, if the rateable value of your property is under £15,000, you could qualify for Small Business Rate Relief. This can potentially reduce your business rates bill significantly, or even eliminate it altogether if the rateable value is below £12,000.

From the 2025–26 tax year, holiday lets that are rated for business rates but don’t qualify for Small Business Rate Relief may still benefit from a 40% discount, capped at £110,000 per business, as announced in the Autumn 2024 Budget.

From 2026, a permanently lower business rates multiplier will also apply to small businesses, which may further reduce costs.

Criteria and calculations vary in Scotland and Wales, so owners should check with their local authority or assessor.

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What if I did not meet Furnished Holiday Let occupancy levels in the 2024-25 tax year?

If your property didn’t meet the 105-day letting requirement for the final year of the Furnished Holiday Let regime (2024–25), you may still be able to retain FHL status for that year by making a Period of Grace Election — as long as you met the criteria in previous years and genuinely intended to let the property.

To qualify:

• Your property must have met the availability and letting criteria in earlier years.
• You must prove genuine intent to let in 2024–25 (e.g. marketing the property as normal).
• The election must be made in the first year the letting condition isn’t met.
• This can allow your property to retain its FHL status for up to two consecutive years, even without meeting the letting threshold.

If you own multiple holiday lets, you may also be able to use an Averaging Election, which allows you to average occupancy across all qualifying properties in the same FHL business. You can combine this with the Period of Grace Election if needed.

For more information, read the HMRC Property Income Manual.

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Expert holiday home letting advice

At Coast & Country Cottages, we market and manage holiday homes across South Devon.

Our local teams in Salcombe and Dartmouth have over 20 years’ experience and are here to offer expert knowledge, advice and support to our owners.

We have also teamed up with Zeal Tax, holiday let tax specialists, who offer a free tax helpline for Coast & Country owners. You can contact Zeal on 01633 499771, email sykesfamily@gozeal.co.uk or visit their website.

Looking for advice on holiday let tax or the best place to buy a holiday home in South Devon? We can help. We’ve put together a selection of blogs to help answer your queries and take the hassle out of holiday letting:

• Electric charging point installation for holiday lets
• Holiday let rules and regulations
• Where to buy a second home in South Devon

If you would like to find out more about letting your holiday home, call our experienced team on 01548 843773 or visit our Let Your Cottage page to request a free Owner’s Guide today.

Click here to request an Owner’s Guide

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Please Note: The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA. 

As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.