Furnished Holiday Let Tax Changes: Which Tax Reliefs Still Apply?

The Furnished Holiday Let (FHL) tax relief regime was abolished in April 2025. 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.

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 scheme, what its removal means for you, and other holiday let tax reliefs 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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2026 guide to Furnished Holiday Let tax

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

• Furnished Holiday Let tax changes after April 2025
• Which holiday let tax advantages still apply after April 2025?
• What was a Furnished Holiday Let?
• What were the tax advantages of owning a Furnished Holiday Let?
• 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 after April 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 have changed.

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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Which holiday let tax reliefs 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.

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

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What was 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.

What were the Furnished Holiday Let criteria?

Prior to 6th April 2025 (1st April 2025 for limited companies), a property could qualify as a Furnished Holiday Let if it met the following criteria:

• The property must’ve been furnished to include everything you would expect from a self-catering holiday cottage
• You must’ve been holiday let commercially with the intention of making a profit
• In a 12-month period, the property must’ve been available to let for 210 days and actually let for 105 days
• Any days that an owner, friends or family spend in the property, for free or at a discounted rate, did not count towards these requirements
• If occupied for more than 31 days by the same person/people, there must not have been more than 155 days of these longer lettings across the year

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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. 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 have portioned 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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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 expert advice on how to run a holiday let in Devon? Call Coast & Country Cottages on 01548 802171 or complete the form below to request contact from our team, including a copy of our free Owner Guide.

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Holiday home owner advice blogs

Looking for more information on holiday letting? From rules and regulations to 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

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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.