What were furnished holiday lets?
Furnished holiday lets used to have their own, more generous tax rules, including full relief for mortgage interest and access to Business Asset Disposal Relief. The regime was abolished from 6 April 2025, so holiday lets are now taxed like other residential lets, including on sale.
Read more in our guide: Capital Gains Tax when selling rental property
What Changed on 6 April 2025
| Tax treatment | Before (FHL) / Now |
|---|---|
| Mortgage interest | Fully deductible / 20% tax credit under Section 24 |
| Capital allowances on furniture and equipment | Available / Only replacement of domestic items relief (existing pools can continue) |
| Business Asset Disposal Relief on sale | 10% then 14% rate on qualifying gains / Not available (limited transitional rule) |
| Rollover and gift holdover relief | Available / Not available |
| Counts as earnings for pension contributions | Yes / No |
| Profit split between spouses | Could be allocated freely / Follows ownership, 50:50 for spouses unless Form 17 |
| Losses | Separate FHL pool / Merged into the ordinary property business |
What the FHL Regime Was
For decades, furnished holiday lettings that met availability and occupancy tests (broadly, available for 210 days a year and actually let for 105) were treated more like a trading business than an investment. That gave owners several tax advantages over ordinary buy-to-let landlords. The government announced the abolition in the Spring Budget 2024 and it took effect on 6 April 2025 for income tax and capital gains tax, and 1 April 2025 for Corporation Tax.
What It Means When Selling a Holiday Let
- CGT at residential rates. Gains are now taxed at the normal Capital Gains Tax rates of 18% and 24%, rather than potentially at the lower Business Asset Disposal Relief rate.
- Transitional relief. Business Asset Disposal Relief may still be available where the FHL business ceased before 6 April 2025 and the property is sold within three years of cessation. Anti-forestalling rules targeted contracts made from 6 March 2024 designed to beat the change.
- Reporting. Sales are reported under the normal 60-day rule.
- Buyers. Holiday lets can be sold to holiday-let investors, to owner-occupiers, or converted to long-term lets. Converting to an assured tenancy brings in the Renters' Rights Act rules.
Other Pressures on Holiday Lets
- Council tax and business rates. Since April 2023 a holiday let in England must be available for 140 days and actually let for 70 days a year to be rated for business rates rather than council tax. Otherwise it may face the second homes council tax premium of up to 100% from April 2025.
- Registration and planning. The government has legislated for a short-term let registration scheme and planning changes for short-term lets in England, with details to follow.
- EPCs. Short-term lets are currently outside the 2030 EPC C requirement, though the government is keeping this under review.
- Higher SDLT for buyers. Investor buyers pay the 5% stamp duty surcharge.
Keep, Convert or Sell?
Owners of former FHLs are weighing three options: carry on as a holiday let under the ordinary rules, switch to long-term letting, or sell. The right answer depends on the occupancy the property achieves, the mortgage, the owner's tax position and the local market. A market appraisal comparing holiday-let, long-let and vacant values is a sensible first step.
Official Sources and Further Reading
- GOV.UK: Furnished holiday lettings tax regime abolition
- HMRC Capital Gains Manual: consequences of FHL abolition (CG73505)
- GOV.UK: Capital Gains Tax rates and allowances
General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.
Frequently Asked Questions
Furnished holiday lets used to have their own, more generous tax rules, including full relief for mortgage interest and access to Business Asset Disposal Relief. The regime was abolished from 6 April 2025, so holiday lets are now taxed like other residential lets, including on sale.
From 6 April 2025 for income tax and capital gains tax, and from 1 April 2025 for Corporation Tax.
Generally not. A limited transitional rule may allow it where the FHL business ceased before 6 April 2025 and the property is sold within three years of cessation. Take advice.
Yes. Since April 2025, mortgage interest on holiday lets owned by individuals gets the same 20% tax credit as other residential lets.
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