Part of our complete guide to landlord tax.
What the FHL regime used to do
Furnished Holiday Lets (FHLs) used to enjoy a genuinely favourable tax treatment compared to ordinary residential lets. Qualifying holiday-let owners could deduct mortgage interest in full, rather than being restricted by Section 24 like other landlords, claim capital allowances on furnishings and equipment, and access certain Capital Gains Tax reliefs on sale that ordinary rental property didn't get.
What's changed
That special regime no longer exists. Furnished holiday lets are now taxed under the same general rules as any other residential rental property:
- Mortgage interest is now restricted the same way as for other landlords, see our guide on Section 24
- The old capital allowances treatment for furnishings no longer applies in the same way
- The previous CGT reliefs specific to FHLs are no longer available on disposal
Key point: This applies to holiday lets you already own, not just new purchases going forward. There's no grandfathering of the old treatment for existing properties that were previously in the FHL regime.
What to actually do about it
If you own, or are considering, a holiday let, the right move now is to re-model the numbers under the current general property tax rules rather than relying on the old FHL case. Occupancy rates, local demand, and management effort still matter, but the specific tax advantage that used to tip the economics in favour of holiday-letting over standard letting is gone.
Not sure how this affects your property? Book a free consultation and we'll work through what the change actually means for your specific numbers.
Frequently asked questions
What was the Furnished Holiday Let regime?
A special tax treatment for qualifying holiday-let properties that let owners deduct mortgage interest in full (unlike other landlords, see Section 24), claim capital allowances on furnishings, and access certain Capital Gains Tax reliefs on sale.
What happens now the regime has been abolished?
Furnished holiday lets are now taxed under the same rules as other residential property lets, including Section 24's restriction on mortgage interest relief and the loss of the previous capital allowances treatment.
Does this affect properties I already own?
Yes, the change applies to existing holiday lets going forward, not just new purchases, there was no grandfathering of the old rules for properties already in the FHL regime.
Should I still run my property as a holiday let?
That depends on the wider economics (occupancy rates, local demand, management effort) now that the specific tax advantage has gone, it's worth modelling the numbers under the new rules rather than assuming the old case for holiday-letting still holds.