Renters' Rights Act 2025, Phase 1 commencement
Transition readiness pack
England

England � Furnished Holiday Let � FHL Abolished � Capital Gains � April 2025

Furnished Holiday Let Tax UK 2026, FHL Abolition Guide

How the abolition of the Furnished Holiday Let tax regime from 6 April 2025 affects landlords in England 2026: loss of Business Asset Disposal Relief, capital allowances, pension eligibility, and how FHL income is taxed now.

10 min readUpdated 15 May 2026Last reviewed: 17 May 2026taxfurnished-holiday-letfhlshort-term-let

What was the Furnished Holiday Let tax regime?

  • Furnished Holiday Lets (FHLs) were a special category of rental property that qualified for tax reliefs not available to normal residential landlords: Business Asset Disposal Relief (formerly Entrepreneurs' Relief) on disposal, pension contribution eligibility based on FHL income, and full capital allowances on furniture and equipment
  • To qualify, a property had to be: available for letting for at least 210 days per tax year; actually let commercially for at least 105 days; and not occupied by the same person for more than 31 consecutive days for more than 155 days per year
  • FHLs were particularly attractive for property investors in tourist areas (Cornwall, Lake District, coastal towns) seeking capital gains tax advantages not available in standard buy-to-let
  • FHL income was treated as earned income for pension purposes, enabling tax-efficient pension contributions funded by FHL profits, a significant benefit for self-employed landlords
  • Both UK and EEA overseas FHL qualifying rules applied until Brexit; from 2021, the EEA overseas FHL regime also ceased

The abolition, what changed from 6 April 2025

  • The FHL regime was abolished from 6 April 2025 (2025/26 tax year onwards). The Spring Budget 2024 announced the change; Finance Act 2024 enacted it with no transitional grandfathering
  • From 6 April 2025, FHL income is treated as standard property income, the same as any other residential letting. There is no longer a separate FHL category on the Self Assessment return
  • Capital Gains Tax: FHL properties no longer qualify for Business Asset Disposal Relief (10% CGT rate on qualifying gains). Gains are taxed at standard residential property CGT rates: 18% (basic rate) and 24% (higher rate) from April 2024
  • Capital allowances: FHL landlords could previously claim capital allowances on furniture and equipment. From 6 April 2025, the replacement of domestic items relief (which applies to standard furnished lettings) replaces capital allowances, only the cost of replacing qualifying domestic items is deductible
  • Pension contributions: FHL income is no longer treated as earned income for pension purposes. Landlords who used FHL profits to fund pension contributions must reassess their pension strategy

Effect on existing FHL owners

  • No transitional relief: the change applies immediately from 6 April 2025 with no grandfathering of existing FHL qualifying status
  • Losses: any FHL losses carried forward to 5 April 2025 can be set against general property income (not just FHL income) from 2025/26 onwards, one of the few beneficial outcomes for existing FHL owners
  • Section 24 now applies: from 6 April 2025, the Section 24 finance cost restriction applies to FHL mortgage interest (previously FHLs were exempt). Higher-rate FHL landlords with mortgages face a further tax increase
  • CGT on disposals: a sale of a former FHL property agreed after 6 April 2025 falls under standard residential property CGT rules. Business Asset Disposal Relief is no longer available even on a property that qualified as FHL for many years
  • If you are considering selling: take specialist advice on the timing of any disposal and the CGT implications, the removal of BADR significantly increases the CGT cost of selling a previously qualifying FHL

Short-term letting compliance post-abolition

  • Despite the tax abolition, short-term and holiday letting remains a legitimate property use. Airbnb and similar platforms continue to operate and income must be declared on Self Assessment
  • Planning permission: in England, short-term letting in some areas requires planning permission under Levelling-Up and Regeneration Act 2023 provisions. London has specific rules: short-term letting by a permanent resident is limited to 90 days per year without planning change of use
  • Licensing: some councils have introduced local short-term let licensing schemes, check your local council's position before committing to a short-term let strategy
  • Rent-a-Room relief: the �7,500 annual exemption applies only to rooms in your main home, it does not apply to separately let properties used for short-term letting
  • Mortgage conditions: most residential mortgages prohibit holiday or short-term letting. A specialist holiday let mortgage may be required, these typically have different LTV limits and rates than standard buy-to-let products

Templates recommended in this guide

Put this guide into practice, get the Periodic Assured Tenancy Agreement from the LetSafe shop, the regulation-current pack that matches this guide.

TenancyLS-E-001

Periodic Assured Tenancy Agreement

The new default English tenancy from 1 May 2026. Periodic from day one, with the prescribed written statement of terms built in. Ships with the Form 4A rent-increase notice template and an Information Sheet delivery acknowledgement form so a buying landlord has every Phase-1 compliance document in one pack.

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