Tax For Furnished Holiday Lets | Expert Advice

As of 6th April 2025, the Furnished Holiday Let tax scheme has ended. However, there are still some aspects to consider, and other holiday let tax rules to comply with.

In this blog, we outline the details around the Furnished Holiday Let (FHL) scheme, what its removal means for you, and other holiday let taxes to be aware of.

Tax can be a complex subject and differs per individual case, so we always recommend you seek professional advice.

Tax for Furnished Holiday Lets

Read our guide with everything you need to know about Furnished Holiday Let Tax. Use the quick links to navigate to a particular topic or read on to find out more.

• Furnished holiday let tax changes
• Buying a holiday home
• What Qualified as a Furnished Holiday Let (FHL)
• Tax benefits of the old FHL Scheme
• Tax benefits for holiday let owners in 2025
• HMRC tax returns for holiday lets
• Holiday let council tax and business rates in Cornwall
• Let with Cornish Cottage Holidays

Furnished holiday let tax changes

As of 6th April 2025, the Furnished Holiday Let Tax Scheme has been removed.

Here are a few things to bear in mind:

• Not everyone will be affected by these changes
• New holiday let owners can still benefit from the FHL tax scheme if their property was ready by 1st April 2025 and meets the letting days criteria in the 12 months after it was first made available.
• Apart from the changes to capital allowances and finance interest costs, there are no changes to how you calculate your taxable profits. Cleaning, maintenance, welcome packs etc. are still tax-deductible.

For more detailed and up-to-date info on Furnished Holiday Let tax, read our parent company, Sykes Holiday Cottages’ post on Furnished Holiday Let tax changes. This guide is written by holiday home tax experts Zeal Tax, and includes all you need to know about upcoming changes.

Buying a holiday home

The first tax you are likely to experience when buying a holiday home is stamp duty land tax (SDLT).

If you are buying as an individual and you or your spouse own other residential property, then residential rates of SDLT will apply, enhanced by a 5% surcharge. This was increased from 3% from 31st October 2024. For more information on this tax, read our guide to holiday home stamp duty.

Specialist advice should be sought if you are purchasing more than one dwelling as part of the transaction. For example, if you are buy buying a home with a holiday cottage attached, or more than one holiday cottage in the same transaction.

From the outset, it is important to decide how you are going to operate your holiday let business. The tax implications may be different depending on whether you are operating as individuals either in sole or joint names, as a partnership or through a limited company. Getting this right from the start can prove beneficial as it is often harder to change at a later date.

What qualified as a Furnished Holiday Let (FHL)

Before the FHL scheme ended in April 2025, there were strict conditions that properties had to meet in order to qualify. To qualify as a Furnished Holiday Let a property had to meet all of the following criteria in a tax year:

• Available for commercial letting to the public for at least 210 days
• Actually let for at least 105 days
• Not let to the same person for more than 31 consecutive days in over 155 days total

Where the other criteria were met in year one, but despite best efforts, letting days did not reach the minimum occupancy in later years, it was possible to make a ‘period of grace’ election. This meant HMRC could still allow the property to be treated as a Furnished Holiday Let, although the actual criteria must have been met at least once in three years.

Tax benefits of the old FHL Scheme

Until its abolition in April 2025, the Furnished Holiday Let (FHL) regime offered holiday let owners a number of generous tax advantages that set them apart from standard residential landlords.

Some of the key benefits included:

• Business Asset Disposal Relief (BADR): Qualifying FHLs could access a reduced Capital Gains Tax (CGT) rate of just 10% on sale, rather than the standard residential rate of up to 28%. This was especially valuable for owners planning to sell after a period of growth.
• Hold-over Relief on Gifts: Holiday lets that qualified as FHLs could be gifted to family members without triggering an immediate CGT bill. The gain could be deferred until a future sale.
• Capital Allowances: Owners could claim tax relief on the cost of fixtures, fittings, and furnishings — helping to reduce their taxable profits significantly.
• Full Mortgage Interest Relief: Unlike standard residential lets, FHLs allowed owners to deduct 100% of finance costs, such as mortgage interest, from their rental profits.
• Trading Income Status: FHL profits were treated as trading income for certain tax purposes, meaning they could be used to justify pension contributions and access more flexible loss reliefs.
• These advantages made the FHL regime highly appealing to holiday home investors — but with the regime now abolished, these specific reliefs are no longer available from the 2025/26 tax year onwards.

However, there are still several valuable tax deductions and reliefs available for holiday let owners under standard property income rules.

Tax benefits for holiday let owners in 2025

While the FHL scheme offered some generous reliefs, the end of the regime doesn’t mean the end of tax efficiency. Although the tax regime has now been abolished, there are still a number of tax advantages available to holiday let owners under the standard property income rules.

You can still:

• Deduct allowable expenses such as cleaning, maintenance, agent fees, insurance, utilities, repairs, and advertising from your rental income to reduce your taxable profits.
• Claim tax relief on mortgage interest – while not fully deductible, you can receive a 20% basic rate tax credit on finance costs like mortgage interest (in line with other residential property lettings).
• Offset certain pre-letting expenses (e.g. decorating or advertising) if they were incurred within seven years of starting to let, and would have been allowable had they been incurred after.
• Qualify for small business rate relief if your property is assessed for business rates – depending on your location and how often the property is available and let.

Although some of the more generous reliefs under the FHL scheme (like capital allowances and Business Asset Disposal Relief) are no longer available, holiday lets can still be a rewarding investment, offering reliable income potential, flexibility of use, and valuable tax deductions.

HMRC tax returns for holiday lets

When letting a holiday property, you must report your rental profits to HMRC through a Self Assessment tax return. Profits are calculated as your rental income minus allowable expenses.

Allowable expenses include:

• Letting agent fees
• Mortgage interest (relief given as a 20% tax credit)
• Advertising costs
• Repairs and maintenance (but not improvements)
• Accountancy fees
• Council tax or business rates (if applicable)

Since the end of the FHL scheme, capital allowances are no longer available, but you may still claim some pre-letting costs, provided they meet HMRC’s rules for property businesses.

If you’re not already registered, you must sign up for Self Assessment by 5 October following the end of the tax year in which your letting activity begins. Find out more about tax returns here.

Holiday let council tax and business rates in Cornwall

If you fit certain criteria, your holiday let may be valued for business rates. This can be positive, as owners can avoid a premium on council tax for second homes and benefit from the offset of small business rates relief.

Self-catering accommodation in England or Scotland is subject to business rates rather than council tax only if it meets the following criteria:

• It has been available for short-term lettings for more than 140 nights in the last 12 months
• It will be available for short-term lettings for more than 140 nights in the next 12 months
• It has been actually let for 70 days in the last 12 months

Holiday lets will initially need to be charged Council Tax for at least 140 days before they can be moved to business rates.

From 1 April 2025, Cornwall Council will charge an additional 100% Council Tax premium on second homes that don’t qualify for business rates. Find out more on the Cornwall Council website.

Let with Cornish Cottage Holidays

It may feel like an overwhelming task when thinking about a holiday home tax but at Cornish Cottage Holidays, our team of holiday letting experts are on hand to offer advice and put you in touch with our trusted advisors.

Find out more about letting with Cornish Cottage Holidays, request your FREE Owner Pack here or call our team on 01326 336773 (option 2) today.

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