Furnished Holiday Lettings tax regime abolished from 6 April 2025

The measure

The Chancellor has announced that the favourable tax treatment furnished holiday lettings (FHLs) currently benefit from will be abolished with effect from 6 April 2025. 

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 10% capital gains tax rate applying; 
• Profits from FHLs count as relevant earnings for pension purposes meaning tax-advantaged pension contributions can be made; 
• Where the accruals basis applies, capital allowances on items such as furniture and fixtures and fittings can be claimed against the rental income; and  
• Where the cash basis applies, expenditure on furniture etc. is generally deductible as an expense of the property business. 

Who will be affected?

Owners of furnished holiday homes which are let out on a commercial basis that meet the conditions to be recognised as a FHL for tax purposes.

When will the measure come into effect?

The current treatment FHLs benefit from will be abolished from 6 April 2025.