🏡 UK Tax Guide for Furnished Holiday Lets (FHLs) – 2025 Edition

Furnished Holiday Lets (FHLs) have long enjoyed unique tax advantages compared to standard residential buy-to-lets. However, there are important changes on the horizon and ongoing obligations every holiday let owner must understand to stay compliant and tax-efficient.

✅ What Qualifies as a Furnished Holiday Let?

To be treated as an FHL for tax purposes in the UK (including Wales and Scotland), a property must meet all of the following conditions:

1. Availability Condition

   • The property must be available for letting to the public for at least 210 days per year.

2. Letting Condition

   • The property must actually be let commercially to the public for at least 105 days per year (excluding any stays by family or friends at reduced or zero rent).

3. Pattern of Occupation Condition

   • No single let must exceed 31 continuous days for more than 155 days in the year.

     
     

📊 Key Tax Advantages (Until April 2025)

Note: The UK government has confirmed that the Furnished Holiday Let tax regime will be abolished from April 2025. Until then, these benefits still apply.

• Capital AllowancesYou can claim capital allowances on items like furniture, white goods, and equipment — something not available to regular buy-to-lets.

• Mortgage Interest DeductionsUnlike standard rentals (which are restricted to a 20% tax credit), FHLs can deduct 100% of mortgage interest as a business expense.

• Profit Splitting Between SpousesProfits can be split in any ratio between spouses or civil partners, regardless of property ownership percentages.

• Business Asset Disposal Relief (BADR)Formerly Entrepreneurs’ Relief — allows you to pay 10% capital gains tax on sale of the property (subject to conditions).

• Pension ContributionsFHL income counts as relevant earnings, meaning it can be used to justify personal pension contributions.

  
  

🧾 What About Business Rates?

When Does a Holiday Let Qualify for Business Rates?

If your property is in England or Wales, it will be assessed for business rates instead of council tax if:

• It is available to let for 140 days or more per year and

• It is actually let for at least 70 days in that year.

This means it will be listed on the Valuation Office Agency (VOA) business rates register.

Scotland

In Scotland, similar rules apply, but there is also a mandatory licensing scheme for short-term lets.

💸 Small Business Rates Relief (SBRR)

If your holiday let qualifies for business rates and has a rateable value below £15,000, you may be eligible for Small Business Rates Relief:

• Properties with a rateable value of £12,000 or less get 100% relief

• Tapered relief applies between £12,001–£15,000

This can result in zero business rates liability for many smaller holiday lets.

Important: SBRR is claimed through your local council, not HMRC.

📅 What’s Changing from April 2025?

The FHL tax regime is being abolished. From the 2025/26 tax year, FHLs will be treated the same as standard residential property income:

• No more capital allowances

• Interest relief capped to the 20% basic rate

• BADR no longer available on sale

• Standard rules for income splitting between spouses will apply

You may wish to accelerate capital allowance claims or consider business structure changes before the end of the 2024/25 tax year.

🧮 Record Keeping & Reporting

Make sure you:

• Maintain accurate booking records to prove FHL criteria are met

• Record expenses and capital purchases

• Keep evidence of availability and advertising

• Submit a Self-Assessment Tax Return annually

You may also need to register for VAT if your income exceeds the £90,000 VAT threshold.

📝 Final Thoughts

Running a Furnished Holiday Let still offers excellent income potential — but the landscape is changing fast. If you’re unsure about your tax position, speak to a qualified tax adviser who understands short-term lets and the coming FHL changes.