Furnished Holiday Let (FHL) Tax Changes 2025 – What UK Landlords Need to Know
The 2025 tax year marks a significant turning point for property investors with Furnished Holiday Lets (FHLs) in the UK. In the Spring Budget 2024, the UK government announced that the FHL tax regime will be abolished from April 2025, aligning the tax treatment of short-term holiday lets with that of long-term residential rentals.
If you operate a furnished holiday let, it’s crucial to understand what’s changing, how it affects your tax position, and what steps you can take to prepare.
What Is a Furnished Holiday Let (FHL)?
An FHL is a property that meets specific criteria:
- It is let on a short-term basis (fewer than 31 consecutive days per stay)
- It is available to let for at least 210 days per year
- It is actually let for at least 105 days per year
Properties that meet these conditions currently benefit from several valuable tax advantages under the FHL regime.
What Tax Benefits Are Ending in 2025?
From April 2025, the following FHL-specific tax benefits will no longer apply:
1. Capital Allowances
FHL owners can currently deduct the cost of furnishings, white goods, and other equipment under capital allowances. This will end in 2025.
2. Mortgage Interest Relief
Currently, FHL owners can deduct the full amount of mortgage interest as an expense. From April 2025, they will instead be subject to the 20% tax credit rule used for standard residential lets.
3. Business Asset Disposal Relief (BADR)
This allows qualifying landlords to pay 10% Capital Gains Tax when selling an FHL. This will be removed, and any gains on disposal will be taxed at standard CGT rates.
4. Pension Contributions
Income from FHLs currently counts as relevant earnings for pension purposes. This benefit will also be withdrawn, reducing pension planning opportunities for landlords.
Why Is the Government Making These Changes?
The abolition of the FHL regime aims to:
- Simplify the tax system
- Reduce distortions between long-term and short-term lets
- Help ease housing availability in tourist hotspots
While it supports housing policy objectives, the change will significantly affect landlords’ bottom lines.
What Should Landlords Do Now?
1. Review Your Business Model
With reduced tax efficiency, consider whether continuing as an FHL is viable or whether to switch to long-term residential letting.
2. Consider Timing of Sales
If you were planning to sell your FHL, doing so before April 2025 may allow you to still benefit from Business Asset Disposal Relief.
3. Maximise Capital Allowances Before the Deadline
Invest in qualifying furnishings or upgrades now to make the most of current allowances.
4. Update Your Tax Forecasts
Plan for reduced post-tax profits from April 2025 onward. Update your financial models to reflect the new rules.
5. Consult with a Tax Adviser
Tax planning is more important than ever. A proactive review can help you mitigate the impact of these changes.
How Eclat Accountancy Can Help
At Eclat Accountancy, we assist FHL landlords with:
- Tax-efficient investment planning
- Claiming capital allowances before the deadline
- Understanding the transition to standard property tax rules
- Advising on sale or restructuring options
Final Thoughts
The Furnished Holiday Let tax changes in 2025 will reshape the property investment landscape. Whether you continue letting, switch strategy, or exit the market, planning ahead is key.
Speak to Eclat Accountancy today to explore your options and protect your profits.
