If you own a furnished holiday let (FHL), you may have heard that the current tax rules are changing — and from 6 April 2025, the FHL regime will be scrapped altogether.
But what happens to losses you’ve built up under the old system?
The good news is — you can still use them, just not in the same way. Let’s break down what’s changing and how it affects your tax position going forward.
What’s Changing from 6 April 2025?
From April 2025, all rental properties — including what were previously classed as FHLs — will be treated the same for tax purposes.
That means:
- You no longer need to separate holiday lets from residential or commercial lets
- You calculate profit and loss at the business level, not for each individual property
- All your rental income and expenses go into one pot
So, if one property makes a loss, it can automatically offset profits from your other properties.
What the Rules Were Before
Under the current (soon to be ending) FHL regime:
- Profits and losses from furnished holiday lets were calculated separately from your other rental income
- Losses from FHLs could only be used to offset future FHL profits
- You couldn’t use FHL losses to reduce tax on your buy-to-lets or commercial properties — and vice versa
This created a bit of a headache for landlords with mixed portfolios.
What Happens to Old Losses from FHLs?
Here’s the key point:
You won’t lose those FHL losses. They’re still valuable — and can now be used more flexibly.
From 6 April 2025 onwards:
- All your properties will form one property business (as long as they’re owned in the same name/capacity)
- Any unrelieved FHL losses from 2024/25 or earlier can now be used to offset profits from your full property portfolio
It’s a much simpler system — and it could mean a lower tax bill for 2025/26.
Example – Mixed Portfolio with FHL Losses
Let’s say you’ve got:
- 2 holiday cottages
- 2 residential lets
- 1 commercial unit
Before April 2025, the FHL losses were ring-fenced and couldn’t be used to reduce profits from your other properties.
Now let’s imagine that by April 2025, you’ve built up £10,000 in FHL losses.
In 2025/26, your total property business earns £32,000 in profit across all five properties.
From April 2025, you can now:
- Offset the £10,000 of FHL losses against your overall profit
- Reduce your taxable profit to £22,000
What Landlords Should Do Now
Check your loss positions
Look at any unrelieved FHL losses from previous years and make sure they’re correctly tracked — they’ll come in handy from April 2025.
Update your bookkeeping
You’ll only need to prepare one set of property business accounts going forward — but it’s still wise to track each property separately for performance monitoring.
Plan ahead for tax efficiency
With one combined property business, future planning gets easier — especially when it comes to loss relief, expense strategy, and profit forecasting.
Need Help Navigating the End of the FHL Regime?
Whether you’ve got one holiday let or a full portfolio of properties, these changes could have a big impact on your tax position — especially if you’ve built up losses over the years.
Not sure how this affects your 2025/26 tax return? Jon and the team are here to help you get organised and maximise your allowances.
Get in touch today to make sure your property business is ready for the changes — and you’re not missing out on valuable tax relief.
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Any questions?
If you’d like a meeting or a video call to discuss this, please get in touch with your favourite Liverpool accountant
- You can ring us on 0151 380 8080
- You can email us at gr****@*********************co.uk