Furnished Holiday Lets Tax Regime Abolished: What Changed in April 2025

The short answer: The furnished holiday lettings (FHL) tax regime was abolished from 1 April 2025 for Corporation Tax and from 6 April 2025 for Income Tax and Capital Gains Tax. A property that used to qualify is now taxed as part of your ordinary UK property business. Several reliefs that only FHLs could use no longer apply. This is general information from HMRC’s published policy paper, not tax advice. Checked against GOV.UK on 2 November 2026.

Part of our series on building a booking website guests trust.

If you are a landlord moving into short lets, or an operator who bought on the strength of FHL tax treatment, this is the first thing to understand. This page sets out what HMRC says changed. Your accountant should confirm how it applies to your own position.

When the change applies

HMRC’s policy paper, Abolition of the furnished holiday lettings tax regime, says the measure applies “on or after 6 April 2025 for Income Tax and for Capital Gains Tax” and “from 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains”.

There is also an anti-forestalling rule from 6 March 2024. It stops people using unconditional contracts to obtain Capital Gains Tax relief under the old FHL rules.

What operators lost

According to the same paper, these changes follow the abolition:

• Capital allowances. The FHL capital allowances treatment ends for new expenditure. Replacement of domestic items relief takes over, and existing capital allowance pools can still claim writing-down allowances.
• Capital Gains Tax reliefs. Roll-over relief, business asset disposal relief, gift relief and relief for loans to traders are no longer available to FHL properties, subject to transitional rules. Companies also lose the substantial shareholdings exemption on these properties.
• Pension relevant earnings. FHL income no longer counts as relevant UK earnings when working out maximum pension relief.
• Full interest relief. Loan interest is restricted to the basic rate of Income Tax, as for other residential lets.

What changed in how profits are treated

Former FHL properties now form part of your UK or overseas property business, taxed under the same rules as non-furnished-holiday-let property. Profits and losses are combined across that business. Losses from a former FHL business, which could previously be carried forward only against that same business, can now be set against the wider property business.

Transitional rules

HMRC says that where a relief depends on conditions in a future year, the rules are not disturbed if the FHL conditions were met before repeal. The paper also says that if an FHL business ceased before the commencement date, business asset disposal relief can still apply to a disposal made within the normal three-year period after cessation. Whether a transitional rule helps you depends on dates and facts we cannot see, so take advice before a sale.

What it means for a direct booking business

Tax treatment does not change what a guest pays, but it changes what you keep. Two practical points:

• Work out your margin after the new interest and allowance rules before you set rates or commit to a purchase.
• Every booking you move off a platform and onto your own site saves the commission. Our OTA commission guide and OTA calculator show what that is worth for your property.

If you are building a direct booking site, see our web design service or book a free call. For the legal side of short lets, see our England short-let register tracker.

Frequently Asked Questions

When did the FHL tax regime end?

From 1 April 2025 for Corporation Tax and from 6 April 2025 for Income Tax and Capital Gains Tax, according to HMRC’s policy paper.

Is my holiday let still taxed as a business?

Yes, but as part of your UK or overseas property business rather than as a separate FHL business. The same rules as other property lets apply.

Can I still claim capital allowances?

HMRC says existing capital allowance pools can still claim writing-down allowances. New expenditure falls under replacement of domestic items relief instead. Confirm the detail with your accountant.

Does this page give tax advice?

No. It summarises one HMRC policy paper. Your tax position depends on your own facts.