Furnished Holiday Lets: A new era

The Furnished Holiday Lettings (FHLs) regime was abolished from 6 April 2025. What does the abolition mean for your holiday let property?

The property will become part of either your main UK or Overseas property business. This means that some of the beneficial tax rules that previously applied will no longer apply, such as:

• Tax relief for dwelling-related loan interest will be restricted to basic rate (20%).
• New capital expenditure will not qualify for capital allowances. Instead, the replacement of domestic items relief may apply.
• Capital Gains Tax reliefs for trading business assets will no longer be available.
• Income from the property will no longer be included in ‘relevant UK earnings’ when calculating maximum pension relief.

There are some transitional measures that you may benefit from:

• It will be possible to carry forward losses that were generated by an FHL business prior to 6 April 2025. These losses will be available to offset against future years’ profits of either the UK or overseas property business, as appropriate.
• Where an FHL business had a capital allowances pool at 5 April 2025, it can be carried forward within the general property business which can claim writing-down allowances on it
• If a business satisfied the FHL conditions and stopped trading before 6 April 2025, business asset disposal relief (BADR) may continue to apply to a disposal that occurs within the normal 3-year period following cessation.