From April 2025, the tax benefits that have made Furnished Holiday Lets (FHLs) so appealing to landlords will be abolished. These changes will have far-reaching implications for those involved in the short-term holiday rental market, making it essential to understand what’s coming and how it might affect your business.
The key dates to be aware of are:
- 6 April 2025 for changes affecting Income Tax and Capital Gains Tax (CGT).
- 1 April 2025 for Corporation Tax and Corporation Tax on chargeable gains.
Here’s what the changes mean and how they could affect you:

What’s Changing for Furnished Holiday Lets?
The repeal of the FHL tax regime will remove the unique benefits landlords currently receive, aligning these businesses with the rules for other property businesses.
The main areas of impact include:
Finance Costs Restriction
- From April 2025, mortgage and loan interest will only qualify for basic rate tax relief, just like other buy-to-let properties.
Capital Allowances
- Owners will no longer be able to claim capital allowances for new expenditure. Instead, relief for replacing domestic items (like furniture or appliances) will apply.
Capital Gains Tax Reliefs
- Reliefs available to trading businesses for chargeable gains—such as Business Asset Disposal Relief—will no longer apply.
Pension Contribution Calculations
- Income from FHLs will no longer count as relevant UK earnings for pension relief purposes, reducing the scope for pension tax relief.
Jointly owned Furnished Holiday Lets
- From April 2025, profits can no longer be split arbitrarily between spouses or civil partners, Instead, income must be split equally on a 50/50 basis unless a different ownership share has been formally agreed. This brings the treatment of FHL income in line with other types of property income.
What Happens After April 2025?
Once the changes take effect, properties that were previously classified as FHLs will be treated as part of a general UK or overseas property business. This means they will fall under the same tax rules as standard buy-to-let properties, removing the specific benefits that holiday lets previously enjoyed.
An anti-forestalling rule is already in place to prevent landlords from attempting to lock in the old benefits ahead of the changes. This rule, effective from 6 March 2024, stops individuals from gaining a tax advantage by entering into unconditional contracts to claim Capital Gains Tax relief under the current FHL regime.
How Will These Changes Impact Holiday Let Businesses?
The removal of the FHL tax regime is likely to have a significant impact on the short-term holiday rental market in the UK. For many landlords, the increased tax liabilities and reduced reliefs may lead to lower profitability. Others may need to reconsider their business models, particularly those relying heavily on the current benefits to remain viable.
However, with the right planning, there may still be opportunities to adapt and minimize the impact. Taking the time to review your tax position now is essential to ensure you’re prepared for the upcoming changes.

Need Help Navigating the Changes?
If you own a holiday let, it’s more important than ever to have a clear tax strategy. Our friendly and experienced team is here to help. We can guide you through the new rules, identify opportunities to optimize your tax position, and ensure your business stays compliant.
Contact one of our advisors today for an initial discussion. Call us on 01235 868888 or email us at [email protected].
