If you’re a landlord with a Furnished Holiday Let (FHL), big tax changes are coming. From 6 April 2025, the favourable tax treatment for FHLs will disappear, and these properties will be taxed in the same way as other residential lets.
While this means no more strict letting conditions, it also means losing valuable tax reliefs—including key Capital Gains Tax (CGT) reliefs.
But there’s still time to take advantage of existing tax breaks—if you act before 5 April 2025. Here’s what you need to know.
Why Does This Matter?
Right now, landlords of FHLs benefit from:
- Business Asset Disposal Relief (BADR) – reducing CGT to just 10%
- Gift Holdover Relief – allowing gains on gifted properties to be deferred
- Capital Allowances – which won’t be available from April 2025
If you’re thinking about selling or gifting your holiday let, timing is everything. By taking action before the tax changes, you could save thousands in tax.
Business Asset Disposal Relief (BADR) – Act Before 5 April 2025
BADR (formerly Entrepreneurs’ Relief) reduces Capital Gains Tax (CGT) to 10% on qualifying gains up to £1 million. This relief applies to business assets—and FHLs qualify under the current rules.
How to Qualify for BADR
To benefit from BADR, your FHL must cease trading before 6 April 2025. The good news? You don’t need to sell your properties straight away—you have up to three years to dispose of them and still claim the relief.
Example: The Potential Savings
Let’s say you own an FHL property with a £1 million capital gain. The tax you pay depends on when you sell:
- Sell in 2024/25: CGT = 10% → £100,000 tax bill (saving up to £140,000)
- Sell in 2025/26: CGT = 14% → £140,000 tax bill (saving up to £100,000)
- Sell in 2026/27: CGT = 18% → £180,000 tax bill (saving up to £60,000)
The earlier you act, the more you could save!
Important: You must fully cease your FHL business to claim BADR. Selling only some of your holiday lets while continuing to operate won’t qualify.
Gift Holdover Relief – Pass on Your FHL Tax-Efficiently
Planning to gift your FHL to family instead of selling? Gift Holdover Relief allows you to defer the capital gain, meaning no immediate CGT bill.
How It Works
- If you gift your FHL, HMRC treats it as a disposal at market value—meaning a hefty tax bill.
- Gift Holdover Relief lets you pass the gain to the recipient, so the tax isn’t due until they sell the property.
- The relief must be claimed by both parties and the transfer must be made before 6 April 2025 to qualify.
This can be a brilliant way to pass on wealth to the next generation without triggering an immediate tax charge.
What Should You Do Now?
With the deadline fast approaching, now is the time to review your options.
- Thinking of selling? Cease your FHL business before 5 April 2025 to lock in BADR.
- Want to pass your holiday let to family? Gift it before 6 April 2025 to claim Gift Holdover Relief.
- Not sure what’s best? Speak to a tax expert to work out the most tax-efficient strategy.
These reliefs won’t be available after April 2025—so if you want to take advantage, you need to act now!
Get Expert Advice Before It’s Too Late
Don’t wait until the last minute to make a decision. If you own a Furnished Holiday Let, now is the time to review your tax position and make the most of existing reliefs.
Want to discuss your options? Get in touch with Jon and the team today—we’ll help you navigate the changes and save on tax while you still can!
Call us now or drop us a message – we’re here to help!
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Any questions?
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