Furnished Holiday Let rules in 2025: what changed and what hosts should do now

The Furnished Holiday Lettings (FHL) regime — which for decades gave short-let owners a friendlier tax treatment than long-term landlords — was abolished from 6 April 2025. If you own a short-let or holiday cottage, this is the most significant tax change to hit the sector in a generation. Here's what's actually changed and what to do about it.

This is general guidance, not tax advice. Speak to an accountant about your specific situation before making decisions.

What was the FHL regime?

Until April 2025, properties that met the FHL conditions (available 210 days, let 105 days, no long-term stays over 31 nights making up more than 155 days) qualified for a set of tax advantages that long-term rental landlords didn't get.

The big four advantages were: full mortgage interest deductibility, capital allowances on furniture and fittings, capital gains tax reliefs on sale (including Business Asset Disposal Relief at 10%), and pension-relevant earnings status.

What changed on 6 April 2025

From the start of the 2025/26 tax year, FHL properties are taxed under the same rules as any other rental property income. In practice that means:

• Mortgage interest relief is restricted to a 20% basic-rate tax credit (rather than a full deduction against rental profits)
• Capital allowances on new furniture purchases are gone — you're back to the standard 'replacement of domestic items' relief
• Capital gains on sale lose the FHL-specific reliefs, including the 10% Business Asset Disposal Relief rate
• Profits no longer count as relevant UK earnings for pension contributions
• FHL losses can't be ring-fenced separately from other property income

What this means in cash terms

For a typical higher-rate-taxpayer host with a mortgaged property, the loss of full interest deductibility is the biggest hit — often several thousand pounds a year in extra tax. For owners planning to sell, the loss of the 10% CGT rate can be significant on a gain of any size.

For lower-rate taxpayers with little or no mortgage, the practical change is much smaller — you've essentially lost some flexibility on capital allowances but the headline tax bill won't move much.

What to do now

• Get a fresh tax projection from your accountant for 2025/26 under the new rules — don't wait until your January 2027 self-assessment to discover the impact
• Review your ownership structure: limited company ownership now looks more attractive for higher-rate-taxpayer hosts than it did 12 months ago
• If you're considering selling, model the CGT impact of selling pre- vs post-April 2025 transition rules with your accountant
• Look at revenue, not just costs: a well-managed short-let still typically out-earns the same property on an AST by 30–80%, so the answer for most owners is to grow gross revenue, not exit the sector
• Keep claiming the 'replacement of domestic items' relief on furniture replacements — it's still available and often overlooked

Should you switch back to a long-term let?

For most of our owners, no. The post-FHL gap between short-let and long-let net yields has narrowed, but short-letting a well-located property still produces meaningfully more income per year — even after the tax changes. The decision is now much more about lifestyle (how hands-off you want to be) and how well the property is being managed.

Where it does tip the other way: highly geared properties owned by higher-rate taxpayers in lower-demand markets, where the revenue gap was already thin. Run the numbers honestly before deciding.

Get a 2025-rules revenue forecast for your property

We can show you what your property would realistically earn under the new tax landscape, with a local revenue forecast and a side-by-side comparison vs. your current setup. Pick your nearest town below or get in touch for a free, no-obligation valuation.