Furnished holiday lets and tax: what changed in 2025 and what it means now

If you own or used to own a holiday let, the first time this becomes real is your tax return. The 2024/25 tax year was the last one with FHL status; those returns were due by 31 January 2026. The 2025/26 tax year is the first with no FHL status at all, and those returns are due by 31 January 2027. So if you are filing now, in 2026, you are among the first owners to see the difference in the numbers.

This page is the overview: what the abolition actually changed, who it affects, and where to go next. Each of the five changes has its own chapter that goes deeper, so you can read the ones that apply to you.

What happened to the furnished holiday let regime

For years, a property that met the qualifying tests counted as a trade for several tax purposes rather than as ordinary rental income. That status carried real advantages: full mortgage interest relief, flexible profit splitting, capital allowances, pension-qualifying earnings, and lower Capital Gains Tax on a sale.

All of that ended in April 2025. Holiday lets are now taxed under the same rules as any other residential let. There is no longer a separate FHL category to qualify for, and the old qualifying tests (the days a property had to be available and actually let) no longer matter for tax. If you want the full background on what the regime was, start with the first chapter: What was a furnished holiday let, and what changed in 2025?.

Nadeem and James walk through the FHL tax changes and what they mean for owners.

The five changes, in brief

The abolition lands in five distinct ways. Here is each in a line, with a link to the chapter that covers it in full.

1. Mortgage interest relief is gone. Holiday lets now fall under Section 24, so finance costs no longer come off your profit; you get a basic-rate (20%) tax relief instead, which hits higher-rate owners hardest. How holiday lets are taxed now.

2. Profit splitting is fixed by ownership share. Jointly owned lets can no longer divide income flexibly; profit follows the legal ownership split, with a Form 17 election needed for unequal beneficial shares between spouses or civil partners. How holiday lets are taxed now.

3. Pension contributions lose their footing. Holiday let income no longer counts as relevant UK earnings for pension tax relief, so it cannot support tax-relieved contributions on its own. How holiday lets are taxed now.

4. Capital allowances are no longer available. You can no longer claim capital allowances on fixtures and furnishings; replacement of domestic items relief applies instead, which covers like-for-like replacements only. What you can claim on a holiday let now.

5. The reliefs on selling have gone. Business Asset Disposal Relief, business asset rollover relief, and gift holdover relief no longer apply to a holiday let on disposal; standard residential Capital Gains Tax rates and 60-day reporting apply. Sell, hold, or incorporate?.

Who is affected, and what to do now

If you hold your property personally, every one of these changes can touch your Self Assessment. The most common surprise is a higher bill: the Section 24 change alone can move a higher-rate owner's tax meaningfully, even with the same rent and the same costs.

If you hold your property through a limited company, the picture is different. Companies were never subject to Section 24 in the same way, and the changes to pensions and individual reliefs work differently inside a company. That is part of why some owners are weighing up incorporation now, though it is a decision that turns entirely on personal numbers and is rarely the right answer for everyone. The fourth chapter, Sell, hold, or incorporate?, is the place to think that through.

For most owners, the practical job right now is getting the 2025/26 return right under the new rules. That means treating the property as a standard residential let: claiming the right expenses, applying the mortgage interest relief correctly, and splitting profit by ownership share. The chapters below cover each of those. If you're in scope for MTD want to see how to record it all in our MTD app, the furnished holiday lets help page walks through the operational detail.

Explore the guide

• What was a furnished holiday let, and what changed in 2025?: the definition, the old qualifying tests, and why they no longer apply.

• How holiday lets are taxed now: the changes that hit your bill: Section 24, profit splitting, pensions, and losses.

• What you can claim on a holiday let now: expenses and capital allowances after abolition: what is deductible, what is not, and the revenue-versus-capital line.

• Sell, hold, or incorporate? Your options now: Capital Gains Tax on a disposal and the decision facing owners.

If you would rather hand the whole thing to a property tax specialist, the holiday let accountancy service page sets out how that works.

Frequently asked questions

Is the furnished holiday let tax regime still available?

No. It was abolished from 6 April 2025 for Income Tax and Capital Gains Tax, and from 1 April 2025 for Corporation Tax. There is no longer a separate FHL category to qualify for.

What replaced the furnished holiday let rules?

Nothing replaced them with a new category. Holiday lets are now taxed under the standard residential property rules, the same as a long-term buy-to-let: Section 24 on mortgage interest, no capital allowances, profit split by ownership share, and standard residential Capital Gains Tax on a sale.

Do I need to do anything different on my tax return?

Yes. From 2025/26 there is no separate FHL section. You report a holiday let as part of your single UK property business, under the standard residential rules, through your normal Self Assessment.

When does the change first show up?

2024/25 was the last FHL year, with returns due by 31 January 2026. 2025/26 is the first year without FHL status, due by 31 January 2027, so owners filing in 2026 are the first to feel it.