The tax rules for Furnished Holiday Lets (FHLs) changed significantly from 6 April 2025.
For many landlords, this means the way rental income is reported — and the tax relief available — will now look very different.
If you own a holiday let alongside other rental properties, it’s especially important to understand how the new rules work before completing your 2025/26 Self-Assessment tax return.
What Has Changed for Furnished Holiday Lets?
The special tax regime for Furnished Holiday Lets officially ended on 6 April 2025.
From that date, holiday lets are treated in the same way as standard residential rental properties for tax purposes.
This means:
- Furnished holiday lets now form part of your main property rental business
- Separate reporting for holiday lets has been removed
- Different tax relief rules now apply
For many landlords, this could affect both their taxable profits and the amount of tax they ultimately pay.
Changes to the Tax Return
Previously, the UK property pages of the Self-Assessment return included a separate section specifically for Furnished Holiday Lets.
For the 2025/26 tax year:
- There is now one combined section for all UK property income
This means landlords with:
- Residential lets
- Commercial property income
- Former furnished holiday lets
…must now combine the income and expenses together when calculating property profits.
Mortgage Interest Relief Has Changed
One of the biggest changes affects finance costs.
Under the old FHL regime:
- Mortgage interest was usually deducted when calculating profits
Under the new rules:
- Finance costs now receive relief as a basic rate tax reduction instead
This works in the same way as standard residential property finance relief.
For higher-rate taxpayers, this could reduce the overall tax efficiency of owning a holiday let.
Capital Allowances Changes
There are also important changes to capital allowances.
From 6 April 2025:
- Capital allowances are no longer available for most domestic items in holiday lets
Instead:
- Relief is now given under the replacement of domestic items rules
However, if your holiday let already had a capital allowances pool before 6 April 2025, you may still be able to continue claiming writing down allowances on existing balances.
What About Existing FHL Losses?
There is some good news for landlords with unused losses.
Under the old rules:
- FHL losses could only be carried forward against future FHL profits
Now:
- Losses brought forward can be offset against the profits of the combined property business
This may provide greater flexibility for some landlords moving forward.
Example of How the New Rules Work
Let’s say Anna owns:
- A residential rental flat
- A holiday cottage by the coast
In 2025/26:
- The flat generates £8,000 in rental income
- The cottage generates £15,000
Under the new rules, Anna must combine:
- The income
- The expenses
- Any brought-forward losses
…across the entire property business.
She also has:
- Mortgage interest of £2,300 on the holiday cottage
- A previous FHL loss of £1,100
After combining the figures:
- Her taxable property profit becomes £13,980
- The mortgage interest relief is given separately as a 20% tax reduction worth £460
This demonstrates how the new reporting process now works in practice.
Why Landlords Need to Pay Attention
The end of the FHL regime represents one of the biggest changes to holiday let taxation in years.
Many landlords may now find:
- Their tax bills increase
- Reliefs are more limited
- Reporting becomes more complex
If you own both holiday lets and standard rental properties, ensuring your figures are combined correctly will be extremely important.
Need Help with Your Property Tax Return?
Property tax rules are becoming increasingly complex, especially following the abolition of the Furnished Holiday Let regime.
At Jon Davies Accountants, we help landlords and property owners across Liverpool and the UK understand changing tax rules and complete their property tax returns accurately and efficiently.
If you own a holiday let and want advice on how the new rules affect you, get in touch with Jon and the team today.
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Any questions?
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