Furnished Holiday Lettings tax regime abolished

Last updated: 10/12/2024

At the Spring Budget 2024, the previous Chancellor announced that the favourable tax treatment furnished holiday lettings (FHLs) currently benefit from will be abolished with effect from 6 April 2025.
The current government decided to continue with abolishing the FHL regime. On 29 July 2024, the government published a policy paper and draft legislation. The draft legislation was reflected in the Finance Bill published on 7 November 2024 with minimal amendments.
Currently, FHLs benefit from a range of beneficial tax rules including:
- The full amount of finance costs (i.e. mortgage interest) can be deducted from FHL income;
- On disposal of an FHL, business asset disposal relief may be available which results in a reduced capital gains tax rate applying (10% in 2024/25);
- Profits from FHLs count as relevant earnings for pension purposes meaning tax-advantaged pension contributions can be made;
- Relief for capital expenditure is more generous for FHLs than ordinary lets.
Individuals with FHL and non-FHL properties will no longer need to calculate and report income separately.
Timing: The current treatment FHLs benefit from is due to be abolished from 6 April 2025. In some cases where the FHL business ceases before 6 April 2025, it may be possible for business asset disposal relief to remain available for up to three years.

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