Furnished holiday lets after the rules changed

The special furnished holiday lettings regime was abolished from 6 April 2025 for income tax and capital gains tax, and from 1 April 2025 for corporation tax. Since then, holiday lets have been taxed in the same way as other rental property, as part of your UK or overseas property business. There's no longer a set of occupancy tests to meet, because there's no separate category to qualify for.

When you sell, the part of the price that relates to fixtures, furniture and equipment you claimed allowances on is brought into the pool as a disposal value. If that's more than the pool balance, the excess is taxed as a balancing charge. Where the pool is left with a balance after the qualifying activity ends, a balancing allowance may be due. How the price is split between the property and its fixtures matters, so agree it with the buyer.

You can't claim capital allowances on new spending on furniture, fixtures and equipment after the abolition date. Instead, replacement of domestic items relief applies, which gives a deduction for replacing like-for-like furnishings, but not for the first purchase. If you had a capital allowances pool before April 2025, you can carry on claiming writing-down allowances on the balance.

Losses carried forward from a furnished holiday let business before April 2025 can now be set against future profits of your wider UK or overseas property business, not just the holiday let. That's a helpful change if you also have long-term lets. Make sure your accountant carries the losses forward correctly, because they're easy to lose sight of when the business categories change.

Generally not any more. Business Asset Disposal Relief, rollover relief and gift holdover relief were available on qualifying holiday lets, but were withdrawn with the regime. There's one exception: if your holiday let business actually stopped before 6 April 2025 (1 April for companies), a sale within three years of it stopping can still qualify, if the conditions were met. The BADR rate is 18% from 6 April 2026.

Not with gift holdover relief for business assets, which was withdrawn for holiday lets from April 2025. A gift to your children is treated as a sale at market value, so capital gains tax can be due on the gain at 18% or 24%. A gift into a trust can still allow the gain to be held over in some cases, but brings inheritance tax charges if it exceeds your nil-rate band.

No. Furnished holiday let profits used to count as relevant UK earnings, which set how much you could pay into a pension with tax relief. That ended with the regime. If your holiday let income was what allowed you to make large pension contributions, you may need to review how much you can contribute and get relief on from 2025/26 onwards.

On a 50:50 basis by default, if you own the property jointly and live together. Under the old rules, couples could split holiday let profits in line with their ownership shares without any declaration. From 2025/26 the normal rule for jointly held property applies. If you own it in unequal shares, you can make a Form 17 declaration, which must reach HMRC within 60 days, to be taxed on your actual shares.

It stopped owners locking in the old capital gains reliefs by signing an unconditional contract before the abolition date and completing afterwards. The rule applies from 6 March 2024, the date the abolition was announced. If you entered into such a contract after that date, you may not get the reliefs you expected. Most owners won't be affected, but it's worth checking if you sold around that time.

Not necessarily. The tax changes made holiday lets less attractive, especially for heavily mortgaged properties owned personally, but they're still taxed like any other rental property. The decision depends on the income after tax and costs, your plans for the property, and the capital gains tax on a sale at 18% or 24%. Compare keeping, converting to a long-term let and selling, with the numbers.

It can make sense for a higher-rate taxpayer with mortgaged holiday lets, because a company deducts interest in full and pays corporation tax at 19% to 25%. Incorporation relief may defer capital gains tax where the letting is run as a genuine business, and holiday lets often involve more day-to-day activity than long-term lets. But SDLT on market value usually applies, and every case needs testing on its facts.

There's no tax charge simply for changing how you let the property, because holiday lets and long-term lets are now in the same property business. Your income and expenses will change, and furniture and furnishings may be treated differently. Check your mortgage terms, because holiday let and buy-to-let mortgages often have different conditions, and local planning or licensing rules may also matter.

Rarely, and the abolition didn't change that. Business Relief isn't available where a business mainly consists of making or holding investments. The courts have generally treated holiday letting as an investment business, even where the owner provides some services. Only lettings with substantial hotel-type services have a realistic chance. Plan on the basis that holiday lets will be in your estate in full for inheritance tax.

There's no election or form to make. From 2025/26, holiday let income is simply reported with your other property income on your Self Assessment return, or on your company's corporation tax return. What matters is that your accountant stops applying the old rules: interest is now restricted for individuals, capital allowances are only claimed on the existing pool, and joint income between spouses follows the 50:50 rule unless you make a Form 17 declaration.

The income tax and capital gains tax changes apply across the UK, so the abolition affects holiday lets everywhere. But property taxes differ. Scotland and Wales have their own land transaction taxes, and local rules on council tax, business rates and short-term let licensing differ too. Those don't change your income tax position, but they do affect the running costs and whether holiday letting still pays.