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
• Running a Furnished Holiday Let
• Selling your holiday home
• Benefits of tax on holiday lets
• Introducing 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 all properties are affected by these changes, including those owned by limited companies.
• It’s a good idea to review your historical capital allowances and make sure all are claimed before the deadline.
• 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 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.

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.

If you are thinking of letting a furnished holiday let (FHL) consider on purchase the value of the fixtures, fittings, furnishings and integral features within the property. Integral features include items such as water systems and heating systems. You can claim capital allowances on these, which reduce your holiday letting taxable profits.

If the property has been let previously as a qualifying FHL then you will need to agree with the seller the values of these particular elements. This needs to be done within two years of purchase. If it has not previously been let as an FHL then you should obtain written confirmation from the seller of that fact.

From the outset, it is important to decide how you are going to operate your furnished 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.

Running a Furnished Holiday Let (FHL)

To qualify as a furnished holiday let, the property must meet the following criteria:

• It must be available to let commercially to the public for at least 210 days a year
• It must be let as such for 105 days a year
• It must not be in the same occupation for more than 31 days in more than 155 days of the year

Where the other criteria are met in year one, but despite best efforts the letting days did not reach the minimum occupancy in later years, then it may be possible to make a ‘period of grace’ election. HMRC will still allow the property to be treated as a furnished holiday let, however the actual criteria must be met at least once in three years.

HMRC tax returns

When letting a furnished holiday let you will be required to report your profits to HMRC on a tax return. Your profits will be the rental income minus the allowable costs.
Allowable costs include:

• Agent fees
• Mortgage interest
• Advertising
• Repairs but not improvements
• Accountancy fees
• Business rates
• Capital allowances

This is not an exhaustive list, and it may be possible to offset some of the costs you incur before you start letting as well.

If you are not already in the tax system, you will need to register with HMRC by 5 October following the end of the tax year in which you start your business. 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.

Selling your holiday home

Hopefully, by the time you sell, the property will have increased in value. A capital gain will then arise, which is taxable. Ordinarily, an individual will have an annual exemption to offset against the capital gain of £12,300 per owner.

One of the benefits of qualifying as a furnished holiday let (FHL) is that the capital gain can be taxed at 10% if it qualifies for business asset disposal relief (previously known as entrepreneurs’ relief).

There is a lifetime limit on assets that qualify for Business Asset Disposal Relief (BADR) of £1M. If the property is not a qualifying FHL, the gain is taxed by up to 28%.

Once the FHL tax regime is abolished in April 2025, FHLs will no longer qualify for BADR. Instead, gains from the sale of such properties will be taxed at the standard CGT rate for residential properties, which is up to 28%.

Gifting your property to family

Sometimes families wish to pass on holiday cottages to the next generation. HMRC will treat this as if it was sold on the open market.

For non-FHLs this would trigger a capital gains tax charge. But another benefit of an FHL is that gifts can be made, and that can be elected not to be subject to immediate capital gains tax.

When you cease to let the property as a qualifying FHL there may be a claw-back of previously claimed capital allowances.

Again, once the FHL tax regime is abolished in April, gifting a holiday property will be treated as a disposal at market value, potentially triggering a capital gains charge. The option to gift your holiday property will no longer apply.

Benefits of tax on holiday lets

The benefits of letting as a Furnished Holiday Let (FHL) over Non-Furnished Holiday Let (non-FHL) rentals include:

• The ability to claim capital allowances.
• The ability to hold over capital gains on a gift to the family.
• The potential to achieve BADR on sale – a 10% tax rate rather than 28%
• Sale proceeds can be rolled over into a new FHL or other business and attract relief from capital gains tax.
• If you have borrowing costs to fund the purchase of the holiday let, the interest can be offset in full against the letting profits. If you have a normal buy to let business that does not qualify for FHLs then the interest relief is restricted.

FHL profits count as earnings for pension contributions purposes.

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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