What happened to the furnished holiday lettings tax rules?

They were abolished from 6 April 2025 for Income Tax and Capital Gains Tax, and from 1 April 2025 for companies. A holiday let is now part of your ordinary property business, taxed like any other let.

The furnished holiday lettings (FHL) regime dated from 1984. To qualify, a property had to be available to let to the public for at least 210 days and actually let for at least 105 days in the tax year. Finance Act 2025, Schedule 5, removed the regime, and HMRC's guidance and manuals, checked on 16 October 2026, set out what followed.

What changed

The last row matters for couples. Holiday letting income used to be an exception to the rule that taxes married couples and civil partners 50:50 on jointly held property. Schedule 5 removed that exception, and HMRC's manual confirms that from 6 April 2025 the 50:50 rule applies unless a Form 17 is made. See how married couples split rental income.

What did not change

The government's clarification note says a number of things stay the same:

• Day-to-day costs, such as utilities, repairs, cleaning products and toiletries for guests, are still claimed as before. The landlord expenses guide covers what counts.
• Holiday accommodation is still standard rated for VAT.
• Council Tax and business rates rules are unchanged by the repeal.
• You do not have to change the way you let. The tax rules are the same whether you take holiday bookings or switch to longer lets.
• The income was always property income, not trading income. The FHL rules only gave it some extra reliefs.

The transitional rules

Schedule 5 and HMRC's guidance soften the switch in four ways:

• Capital allowance pools. Spending already in a pool by 5 April 2025 can keep receiving writing-down allowances until the pool is used up or a small pool claim is made.
• Losses. Unused FHL losses carry forward into your UK or overseas property business, where they can be set against later property profits.
• Business asset disposal relief. If an FHL business actually stopped before 6 April 2025, the relief may still apply to a disposal within the normal 3 years after it stopped. The repeal itself does not count as stopping. A business stops only when there are no bookings or lettings and no intention to start again.
• Anti-forestalling. Where an unconditional contract was made between 6 March 2024 and 5 April 2025 but the property was transferred on or after 6 April 2025, rollover relief, gift relief and business asset disposal relief are blocked. That does not apply if the contract had no purpose of avoiding the repeal and was either wholly commercial or between unconnected parties, and the claim includes a statement saying so.

What this means for you

The biggest change for most owners is mortgage interest. Take a holiday cottage owner in England with a salary of £60,000, paying £6,000 a year in mortgage interest on the cottage, which makes £15,000 profit before interest. All of that profit falls in the higher rate band.

On these figures, the owner pays £1,200 more tax for 2026-27 than under the old rules. The reduction is worked out on the lowest of your finance costs, your property profits and your income above the personal allowance, and it cannot create a refund. Finance Act 2026 sets the property basic rate at 22% for 2027-28 and gives the reduction at that rate. From then, rental profit in England and Northern Ireland is also taxed at new property rates of 22%, 42% and 47%, while Wales and Scotland can set their own property rates.

Owners with other lets gain something too. Holiday and long-term lets are now one business, so a loss on one can reduce profit on another. The landlord tax guide shows how the rest of the calculation works.

Steps for holiday let owners

1. Report holiday let income and costs with your other property income from 2025-26 onwards, not as a separate FHL business.
2. Move any mortgage interest into the residential finance costs figure, so it gets the tax reduction (20% for 2026-27) rather than being deducted.
3. Keep claiming writing-down allowances on any pool brought forward from 5 April 2025, and use replacement of domestic items relief for new replacements.
4. Carry any unused FHL losses into your property business.
5. If you own the let with your spouse or civil partner in unequal shares, check whether a Form 17 is in place, because 50:50 now applies otherwise.
6. Before selling, check the transitional Capital Gains Tax rules, because the old reliefs no longer apply to most disposals.

Holiday let rent counts towards your Making Tax Digital qualifying income like any other rent, and the free MTD check shows when you need to join. The landlord section has more guides for small landlords.