Furnished Holiday Lettings: Tax Changes From April 2025

26 Mar Furnished Holiday Lettings: Tax Changes From April 2025

A quick recap: what is the Furnished Holiday Lettings regime?

The Furnished Holiday Lettings rules apply when you let out a furnished property on a short-term basis, typically to holidaymakers, and meet certain criteria. These include making the property available for at least 210 days a year and actually letting it for 105 of those days.

If your property qualifies, you’ve likely benefited from:

• Full relief for mortgage interest costs
• Capital allowances on things like furniture and equipment
• Access to Capital Gains Tax reliefs, such as Business Asset Disposal Relief
• Being able to count your Furnished Holiday Lettings income towards pension contributions

These perks have made holiday lets a more tax-efficient option, until now.

What’s changing?

From 6 April 2025, the Furnished Holiday Lettings regime will be scrapped completely. That means:

❌ No more full mortgage interest deduction
Landlords will no longer be able to deduct all their finance costs from their rental income. Instead, the basic rate relief restriction (currently 20%) will apply — the same rule that applies to standard buy-to-let landlords.

❌ No more capital allowances
You won’t be able to claim capital allowances on furniture, appliances, or fixtures in the property. Instead, you may only be able to claim a deduction for replacements under the “replacement of domestic items” relief, which is less generous.

❌ Loss of Capital Gains Tax reliefs
Furnished Holiday Lettings owners will no longer have access to trading reliefs like Business Asset Disposal Relief, rollover relief, or gift relief. This could mean a bigger tax bill if you sell or gift the property in future.

❌ Income may no longer count towards pension contributions
Furnished Holiday Lettings income is currently treated as relevant earnings, allowing you to contribute more into your pension. From April 2025, this will no longer be the case.

⚠️ Changes for jointly owned properties
If you own a holiday let with your spouse or civil partner, and currently split the income in a way that reflects your ownership shares, this will change. After the regime ends, income will default to a 50:50 split unless you’ve completed a Form 17 and your ownership shares are clearly documented.

Unless action is taken, profits from former FHLs will be deemed split 50:50 between married co-owners, in the same way as profits from “ordinary” property lets. 

Couples who want to split profits unequally from 2025/26 will only be able to do so if the proposed income split follows the actual underlying beneficial ownership of the property. For instance, if the tax efficient split is agreed as the husband gets 20% of the profits and the wife 80%, then they need to own the property in that ratio. They must also report this to HMRC by completing a form 17 on 6 April 2025 and submitting it to HMRC within 60 days. The timing is critical, as forms signed before that date may not be accepted by HMRC, and form 17 cannot be backdated.

Form 17 can only be used to reflect the actual underlying beneficial ownership of the property – couples can’t just pick any desired split. Evidence of the unequal ownership declared has to be submitted to HMRC along with the form 17.

What does this mean for you?

This is a big change, and depending on your situation it could impact:

• Your annual tax bill
• Your future plans for the property
• How you structure ownership
• Your pension strategy
• Whether it still makes financial sense to run a holiday let

Let’s say you’ve been claiming full mortgage interest relief and capital allowances each year. Losing these could reduce your profit and increase your tax bill. If you were relying on CGT reliefs when you come to sell the property, those plans may now need a rethink.

If you have a furnished holiday letting what can you do next?

There’s no need to panic, but we do recommend taking some time now to review your options.

✅ Understand your exposure: Work out how much tax relief you’re currently claiming under Furnished Holiday Lettings rules. This gives you a baseline for comparison.
✅ Review ownership arrangements: If you jointly own the property it’s worth checking how income will be taxed going forward, especially if you want to avoid a 50:50 split.
✅ Get tailored advice: Everyone’s circumstances are different, and this change affects multiple areas of tax. The best step you can take is to speak with an accountant who understands your situation.

We’re here to help

At R J Francis & Co, we’re already working with clients to prepare for the end of the Furnished Holiday Lettings regime. If you own a holiday let and are wondering how this affects you, or what your options are, please get in touch with us today. We can help you make sense of the changes and plan ahead with confidence.
You can find all out contact details here.

You can find the full policy paper regarding this change at www.gov.uk.

The information outlined is intended for guidance only. It is based upon our understanding of current legislation and announcements and is correct at the time of publication. No liability is accepted by R J Francis & Co for actions taken in reliance upon the information given and it is recommended that appropriate professional advice should be taken specific to your circumstances.