Furnished Holiday Letting
The FHL tax regime ended on 5th April 2025.
The end of the Furnished Holiday Letting (FHL) tax regime on 5th April 2025: With effect from 6th April 2025, all Furnished Holiday Lettings are treated the same as any other residential letting business and all the benefits of an FHL have disappears. In the notes below we describe the transitional arrangements. After 5th April 2025, former FHL properties simply form part of the taxpayer’s UK or overseas property business, which now includes all property profits and losses in that business.
The Furnished Holiday Letting (FHL) tax regime ended on 5th April 2025
With effect from 6th April 2025, all Furnished Holiday Lettings are treated the same as any other residential letting business and all the benefits of an FHL have disappeared. In the notes below, we describe the transitional arrangements.
After 5th April 2025, former FHL properties simply form part of the taxpayer’s UK or overseas property business, which includes all property profits and losses in that business.
None of the changes have any effect on the VAT status of the FHL business or on the VAT treatment.
There are some major planning considerations below.
What do I need to know as a non-resident if I have a FHL (Furnished Holiday Let) in the UK from a tax perspective? Tax for Furnished Holiday Letting (FHL): Landlords Tax Services can assist with this or any other UK property tax matter.
Legacy benefits of an FHL
Capital Allowances
With effect from 6th April 2025, no claim may be made for Capital Allowance for items purchased on or after that date, but where an FHL business has an ongoing Capital Allowance pool of expenditure as at 6th April 2025, it may continue to claim writing down allowances, but not add to the pool.
Inheritance Tax
Business Property Relief would eliminate the Inheritance Tax (IHT) on the underlying assets. In general, an FHL will not qualify for Business Property Relief. However, in a recent case of Grace Joyce Graham dec’d, the Tribunal accepted that there is a complete spectrum of lettings from basic letting at one end to a full hotel at the other. Where, along the spectrum, the cut-off is to be found has not yet been decided. In the Graham case, the Tribunal decided that, because guests had been provided with bicycles, pool, etc., the property did qualify for Business Property Relief.
Capital Gains Tax
Capital Gains Tax (CGT) applies to the gain in value realised when you dispose of a property. If the property has not been your main residence, then there are few reliefs or allowances. When you sell a rental property, you can expect CGT of 18% / 24% (mostly 24%) (correct at the time of writing), unless it has been an FHL. FHLs qualify for Business Asset Disposal Relief (BADR) reducing the rate of CGT to 10%.
- Where an FHL business ceases on or after 6th April 2025, BADR is not available.
- Where cessation occurs before 6th April 2025, BADR will continue to be available if the disposal of the business asset occurs within three years. However, the rate of Capital Gains Tax applicable to disposal of assets qualifying for BADR has risen from 10% to 14% on 6th April 2025.
Losses
Losses derived from ordinary lettings can only be carried forward to future years to offset profits made in future years.
- Losses made after 5th April 2025 are treated the same as the losses of any other residential lettings business: they may only be set against the profits of the same business in the same year or in future years.
- The end of the Furnished Holiday Letting (FHL) tax regime on 5th April 2025: With effect from 6th April 2025, all Furnished Holiday Lettings will be treated the same as any other residential letting business and all the benefits of an FHL will disappear. In the notes below we describe the transitional arrangements.
The end of the Furnished Holiday Letting (FHL) tax regime on 5th April 2025: With effect from 6th April 2025, all Furnished Holiday Lettings will be treated the same as any other residential letting business and all the benefits of an FHL will disappear. In the notes below we describe the transitional arrangements.
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What do I need to know as a non-resident if I have a FHL (Furnished Holiday Let) in the UK from a tax perspective? Tax for Furnished Holiday Letting (FHL): Landlords Tax Services can assist with this or any other UK property tax matter.
