Furnished Holiday Lets

From 6 April 2025, the Furnished Holiday Let (FHL) tax regime has been abolished. All residential property — whether long-term let, short-term let, or holiday let — is now treated the same way for tax purposes.

This guide explains what's changed and how Provestor treats holiday letting income under the new rules.

What the FHL regime was

Before 6 April 2025, properties that met certain qualifying conditions could be treated as Furnished Holiday Lets for tax purposes.

Qualifying criteria (2024/25 and earlier):

  • Available for holiday letting for at least 210 days per year
  • Actually let as holiday accommodation for at least 105 days per year

Tax advantages: Properties that qualified as FHLs had access to:

  • Capital allowances for furniture, fixtures, and equipment
  • Full mortgage interest relief — finance costs were deducted in full from rental income, not subject to the Section 24 restriction that applied to other residential property
  • Pension relief — FHL profits counted as relevant earnings for pension contribution purposes
  • Loss relief — losses could be set against general income, not just property profits

These advantages made the FHL regime significantly more tax-efficient than standard residential property letting.

What changed from 6 April 2025

The FHL tax regime ceased to apply from:

  • 6 April 2025 for Income Tax
  • 1 April 2025 for Corporation Tax

From these dates onwards:

  • There is no separate FHL category for tax purposes
  • All residential property lettings are treated as standard residential property business
  • The tax advantages listed above no longer apply

This applies regardless of how a property is used. A cottage let on a weekly basis to holidaymakers is taxed in exactly the same way as a flat let on a 12-month assured shorthold tenancy.

What this means for you

If you previously ran properties as FHLs, the key changes are:

Mortgage interest: Section 24 restriction now applies

Finance costs for residential holiday lets are now subject to the Section 24 restriction, the same as other residential property.

What this means:

  • Mortgage interest no longer reduces your rental profit directly
  • You record the full amount of finance costs in Provestor
  • HMRC gives you a basic rate (20%) tax reduction based on those costs
  • Higher-rate and additional-rate taxpayers pay more tax than under the old FHL rules

See Recording mortgage interest and property finance costs for details.

Capital allowances: no longer available

You can no longer claim capital allowances for furniture, fixtures, or equipment in holiday lets.

Instead, you use replacement of domestic items relief:

  • You can claim the cost of replacing domestic items (furniture, furnishings, appliances, kitchenware, etc.)
  • You cannot claim the cost of the initial item
  • You cannot claim improvements — only like-for-like replacements

This is the same relief that applies to all residential property. See Allowable expenses for guidance on replacement of domestic items.

Losses: property business losses only

Losses from holiday lets can only be carried forward to set against future property profits. They cannot be set against general income (employment income, self-employment, etc.).

This is consistent with standard residential property business treatment.

How Provestor treats holiday lets

Provestor is designed for the post-April 2025 regime. All residential property is treated the same — there is no special FHL category or workflow.

Adding a holiday let property

When you add a property in Provestor:

  1. In your business workspace, choose Add property
  2. Enter the property details
  3. In the Property type dropdown, you can select:
    • Residential
    • FHL
    • Other

Important: Selecting "FHL" has no impact on tax treatment. It's purely for your own reference.

For tax purposes, Provestor treats properties marked as "FHL" exactly the same as properties marked as "Residential":

  • Finance costs are recorded as residential finance costs (Section 24 applies)
  • Capital allowances are not available
  • Expenses follow residential property rules

Recording income and expenses

Record income and expenses for holiday lets in the same way as any other residential property:

  • Rental income — Record when received (cash basis)
  • Cleaning, maintenance, utilities — Record as allowable expenses
  • Mortgage interest — Record using the mortgage finance costs category, entering the capital repayment separately
  • Furniture replacements — Use replacement of domestic items relief

See Introduction to record keeping for the complete workflow.

Historic FHL periods (before April 2025)

If you had FHL income in the 2024/25 tax year or earlier, those historic periods still carry FHL-specific reporting requirements. These sit outside Making Tax Digital for Income Tax Self Assessment.

You'll handle historic FHL activity through traditional Self Assessment processes for the relevant tax years.

For 2025/26 onwards (the Making Tax Digital years), there is no FHL category. All your residential property income is reported under a single property business.

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