FHL Tax Changes 2025: What Landlords Need to Know

A property only counted as an FHL if it cleared three tests in the year. Two were day counts. It had to be available for letting as furnished holiday accommodation for at least 210 days, and let commercially to the public for at least 105 days.

The third was the pattern of occupation. HMRC set it out in HS253, the helpsheet for 2024–25 — a historic source that never mentions the abolition, so read it for the old rules only: “If the total of all lettings that exceed 31 continuous days is more than 155 days during the year, this condition is not met”. It is an aggregate test, not a test on each letting on its own.

Clear all three and your holiday letting was treated as a trade. Trade status changed four things, set out in HMRC’s guidance on the special tax treatment of furnished holiday lettings:

• Capital allowances on the furniture, white goods and other equipment inside the property.
• Profits counted as relevant UK earnings for pension purposes.
• The finance-cost restriction did not apply to loans or mortgages taken out for the holiday let.
• Replacement of Domestic Items Relief was not available.

New spending is out. After repeal, capital allowances are no longer available on fixtures, furniture or furnishings. The underlying bar is long-standing: expenditure on plant or machinery for use in a dwelling-house is not qualifying expenditure for a property business.

Your existing pool survives. Where qualifying expenditure was in a capital allowance pool by 5 April 2025, writing down allowances, balancing allowances and charges can continue to be claimed after April 2025 on that pooled expenditure until it is used up or a small pool claim is made. The small pools allowance lets you write off a balance of £1,000 or less in one go instead of running it down year by year.

Mechanically the pool moves rather than closes. The unrelieved balance is transferred to the pool for the corresponding property activity, you are not treated as having disposed of the assets, and a short-life asset election already made continues to have effect.

Watch for a balancing charge later. One can arise on a disposal or balancing event, such as a sale, loss or destruction of assets, or cessation of business use, where the proceeds beat the tax value. Box 31 is still on the return, so a charge can land years after abolition — and there is no Annual Investment Allowance to set against dwelling-house items, as the UK property notes confirm.

New furniture is not a dead cost. Replacing a sofa, a bed or a fridge now runs through Replacement of Domestic Items Relief, the same route every other let residential property uses.

Selling a holiday let used to reach trade reliefs. Because a qualifying holiday letting business was treated as a trade, a disposal could claim rollover relief under sections 152 to 157 TCGA 1992, Business Asset Disposal Relief under section 169H, gift hold-over relief under section 165, and relief for loans to traders.

Those routes close. HMRC puts it flatly: BADR will not be available where there is a disposal of the whole or part of a FHL business on or after 6 April 2025. Rollover relief goes the same way where the replacement asset is acquired on or after 6 April 2025 for a holiday lettings business, because that activity is no longer treated as a trade. Note the test there is the acquisition date of the replacement asset, not the date you sold the old one. Relief for loans to traders closes on a third test again: it is unavailable where the claim is made on or after 6 April 2025, unless the conditions in section 253(3A) are met and the earlier time specified in the claim falls before that date.

If your business ceased before April 2025

This is the exception worth money, and the one most easily missed. Where the FHL conditions were satisfied by a business that ceased before the commencement date, relief may continue to apply to a disposal that occurs within the normal 3-year period following cessation. An owner who wound up a holiday-letting business during 2024 may still have BADR on a disposal well into 2027. Check the date you actually ceased before you accept that the relief has gone.

Contracts that straddle 6 April 2025 (anti-forestalling)

Under section 28 TCGA 1992 the date of disposal is normally the date of the contract, not the date of completion. Without a further rule, an unconditional contract signed shortly before abolition would lock in the old trade treatment however long completion took. The anti-forestalling rule closes that door.

The window opens well before abolition. It catches contracts made on or after 6 March 2024, and engages where an unconditional contract is entered into before 6 April 2025, the disposal completes on or after 6 April 2025, and a claim for rollover relief, BADR or gift hold-over relief is made. A contract signed and completed before 6 April 2025 is untouched by any of this.

Relief survives the window anyway where the contract had no purpose of avoiding the effect of the abolition of the FHL rules, the contract was entered into wholly for commercial reasons or the parties to the contract are not connected persons, and the claim includes a statement that the above are met. That statement is a filing step in its own right — leave it out and the relief goes with it.

Married couples and civil partners who own property jointly are taxed 50/50 by default. Holiday lets were carved out of that: up to 5 April 2025 the 50/50 rule does not apply to income from the commercial letting of furnished holiday accommodation. The carve-out sat in exceptions D and DA of s.836(3) ITA 2007, and from 6 April 2025 both have been withdrawn.

So from that date spouses and civil partners are treated as entitled to receive equal shares of the income, unless they own the property in different shares. If you split a holiday-let profit 90/10 in 2024–25 on the strength of who ran it, that split has gone.

Form 17 is the only way off the default, and it is narrower than most owners expect. It needs two things at once: that entitlement to the income and the property are in unequal shares, and that the share of profits and losses you declare matches the share each holds in the property. The declaration itself must reach HMRC within 60 days of the date you make it.

Read that carefully, because it is the point owners most often get wrong. Form 17 reports an unequal beneficial ownership; it does not create one. A couple who own a property 50/50 cannot use it to pick a 90/10 income split — there is no underlying unequal share to declare, and the figure you declare has to mirror the ownership rather than the answer you would prefer.

Co-owners who are not spouses or civil partners were never inside the 50/50 rule and are unaffected. Their share of any profit or loss will normally be the same as the share owned in the property being let.

A former holiday let is now an ordinary part of your UK property business, so it records like one. #MTDone! takes the rent and expenses under the standard UK property-income categories, and keeps finance costs in a category of their own rather than mixed into repairs or management — that figure is what drives the basic rate tax reduction at the end of the year.

As sections 1 and 5 set out, a former EEA holiday let belongs to a separate overseas property business under the rules, with no set-off against the UK one. #MTDone! treats your foreign property business the same way: it keeps foreign income and expenses in their own records, separate from your UK property business, and submits their quarterly updates on their own schedule. Foreign property filing in #MTDone! is in development and is not yet live.

When you are mandated for Making Tax Digital for Income Tax, the quarterly updates and the Final Declaration go to HMRC from those same records, without re-keying anything into a separate spreadsheet.