The Furnished Holiday Lettings (FHL) regime ended on 6 April 2025 for income tax and 1 April 2025 for corporation tax. UK landlords with cottages, beach houses and short-let flats no longer enjoy the favourable treatment that has set FHL apart from ordinary rental property since the 1980s. This guide explains what was lost, the transitional rules, and the planning steps that still matter for holiday-let owners. For the wider context, see our hub on UK tax and VAT for businesses and landlords.
What FHL status used to give
FHL income was treated like a trade for several specific purposes, despite being property income for everything else.
| Benefit | FHL position before April 2025 | Other lettings |
|---|---|---|
| Capital allowances on furniture and fittings | Yes | No (only Replacement of Domestic Items) |
| Mortgage interest fully deductible | Yes | Restricted to a basic-rate tax credit |
| Business Asset Disposal Relief on sale | Potentially available if the former conditions were met | Generally unavailable under the post-abolition rules, subject to transitional provisions |
| Gift Hold-Over Relief | Yes | No |
| Pensionable earnings | Yes | No |
What changed from April 2025
Since abolition, former FHL income is ordinary property income subject to all the standard restrictions.
- Mortgage interest gets a basic-rate tax credit rather than full deduction
- New capital expenditure no longer qualifies for AIA or writing-down allowances
- Replacement of Domestic Items relief replaces capital allowances for furniture
- A later sale is normally subject to standard Capital Gains Tax rates rather than BADR, although transitional rules can apply to some former FHL businesses
- Profits stop counting as relevant earnings for pension contributions
- Spouses must split income and gains in legal ownership shares, not freely
Transitional rules
HMRC has confirmed several softening provisions to help landlords through the change.
| Item | Transitional treatment |
|---|---|
| Existing capital allowance pools | Continue to receive writing-down allowances |
| New capital expenditure post-April 2025 | No allowances |
| Brought-forward FHL losses | Carried forward against general rental profits |
| Pension contributions | FHL profits to 5 April 2025 still relevant earnings |
| BADR on sale within 3 years of cessation | Available if other conditions met |
Planning after abolition
A handful of practical steps can soften the financial impact of losing FHL status.
- Keep claiming writing-down allowances on pools brought forward from the FHL business
- Use Replacement of Domestic Items relief for furniture and appliances you replace
- Consider incorporation if the mortgage interest restriction is the binding constraint, after weighing the Capital Gains Tax and SDLT costs of moving the property
- Review ownership splits between spouses, since income now follows legal ownership
- If you stopped letting before April 2025, check whether a sale within 3 years of cessation can still qualify for BADR
- Review VAT registration if your turnover crosses the current threshold
- Check whether the small property income allowance now suits any low-income lets
- Update your bookkeeping software to reclassify FHL accounts to ordinary lettings
Final thoughts
The end of the FHL regime is a significant tax change that warrants reviewing your structure and finance arrangements. Pair this with our capital allowances for UK businesses article, the self-assessment tax return guide, and the VAT registration threshold explainer. Verify the latest position on the HMRC FHL abolition technical note. See pricing for bookkeeping that tracks each property as its own project.