The Future of Furnished Holiday Lettings: What the Abolishment Means for Landlords
From April 2025, the Furnished Holiday Lettings (FHL) tax regime will be abolished. This change, announced in the Spring Budget 2024 and confirmed in the 2025 Spring Statement, marks a major shift for landlords who operate short-term holiday accommodation in the UK and the EEA.
At Exchange Accountants, we’re already helping clients prepare for the transition, and in this article, we break down what the change means, what’s going away, and how property owners can adapt.
What Is the FHL Regime?
The FHL regime was originally introduced to incentivise landlords to offer short-term, fully furnished holiday accommodation. Properties that met certain conditions could qualify for several generous tax benefits that are not available to standard residential lettings, including:
Capital Gains Tax reliefs such as Business Asset Disposal Relief (BADR), roll-over relief, and gift hold-over relief.
Capital allowances on furniture, fixtures, and fittings.
Pension contribution advantages — profits counted as relevant earnings for pension purposes.
Treatment as a trade for certain tax purposes.
To qualify, a property needed to be:
Located in the UK or the EEA,
Available for letting for at least 210 days a year,
Let commercially for at least 105 days a year,
Not occupied by the same person for more than 31 continuous days in more than 155 days of the year.
What’s Changing?
From 6 April 2025, the FHL regime will be abolished. This means:
FHL properties will now be taxed in the same way as other residential rental properties.
Many of the tax benefits listed above will be withdrawn.
Landlords will no longer be able to access Capital Gains Tax reliefs or claim capital allowances on FHL properties.
Income from holiday lets will no longer count as ‘relevant earnings’ for pension contributions.
For Capital Gains Tax, the disposal of FHL properties will no longer qualify for Business Asset Disposal Relief from 6 April 2025 onwards.
What About Transitional Relief?
The government has announced some transitional rules, including:
Capital Gains Tax Relief: If you sell a property that qualified for FHL before 6 April 2025, you may still qualify for Business Asset Disposal Relief, but only if contracts were exchanged before that date.
Capital Allowances: There will be some transitional provisions for businesses that had previously claimed capital allowances under FHL rules.
Loss Relief: Any losses from FHL businesses can be carried forward but only set against future profits of the same property business.
What Should Landlords Do Now?
If you currently operate a furnished holiday let, here are some actions to take now:
1. Review Your Portfolio
Consider how this change affects your profitability. If you own multiple properties, now is the time to weigh the tax advantages of selling, switching to long-term lets, or restructuring your portfolio.
2. Assess CGT Implications
If you were considering selling your FHL and relying on BADR (formerly Entrepreneurs’ Relief), act quickly. To qualify under the old rules, contracts must be exchanged before 6 April 2025.
3. Talk to Your Accountant
At Exchange, we’re already working with clients to model the long-term tax impact of these changes. We can help you review:
Capital allowances already claimed,
Capital Gains Tax exposure,
Restructuring options,
Pension planning adjustments.
4. Evaluate Your Business Strategy
With increased tax and potentially reduced profits, does your FHL still make sense as a business model? Would longer-term rental arrangements or incorporation be more suitable for your goals?
How Exchange Accountants Can Help
We understand that this change creates uncertainty — and possibly frustration — for many landlords who have relied on the FHL regime for years.
Our team can support you by:
Reviewing your existing FHL properties and advising on next steps,
Helping you prepare for changes to CGT reliefs and capital allowances,
Planning for post-2025 profitability and tax strategy,
Ensuring you remain fully compliant with HMRC’s updated rules.
We’ll work with you to adapt your property business with as little disruption as possible.
Final Thoughts
The abolishment of the Furnished Holiday Lettings regime marks a major shift in the property tax landscape. For some, it may be a time to exit the holiday rental market; for others, it could be an opportunity to rethink their letting strategy or restructure their business.
Whatever your situation, getting the right advice early is key.
