Guide to furnished holiday let tax
What is a furnished holiday let?
A furnished holiday let (FHL) is a type of short-term rental property which has a statutory definition.
This statutory definition is important; as long as your property meets certain conditions, you can access specific elements of the tax system which can be advantageous.
If your property is classified as a FHL, you can:
Apply mortgage interest relief**, meaning you can offset your full mortgage interest from your profit
Claim 'capital allowances'**, which means the costs of furnishing/refurbishing the property are tax-deductible
Class the profits as earnings, allowing you to make tax-advantaged pension contributions**
Claim Capital Gains Tax relief** when you sell the property
How to qualify as a FHL
HMRC states that to qualify as a furnished holiday let, your property must be:
Situated in the UK or European Economic Area
Furnished
Commercially let out (you must intend to make a profit)
Occupancy conditions
There are three occupancy conditions that a furnished holiday let must meet to qualify for tax advantages.
1
The property must be available to commercially let out to the public for at least 210 days (30 weeks) per year.
2
If let to the same person for more than 31 days, there should be no more than 155 days (22 weeks) of ‘long occupation’ in that year.
3
The property must be rented out to the public for at least 105 days (15 weeks) for the 210 days available. This does not include private or discounted use by yourself, family or friends.
What happens if my property doesn’t reach the threshold?
If you don’t reach the 105 day occupancy condition, there are two options available (known as elections) that can help:
Averaging election: If you’ve more than one FHL property, you can average the rate of occupancy across all properties.
Period of grace election: If your property reaches the occupancy threshold in some years but not in others, you can apply for a period of grace (for a maximum of 2 consecutive years).
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