The FHL regime ended on 6 April 2025: a UK holiday let is now taxed as an ordinary let on the 2025-26 Self Assessment return due by 31 January 2027, mortgage interest becomes a 20% credit, furniture loses capital allowances and the capital gains reliefs are gone. This guide dates each change, Making Tax Digital and non-resident owners included.
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Start freeThe furnished holiday lettings (FHL) tax regime no longer exists. It was abolished from 6 April 2025 for income tax and capital gains tax, and from 1 April 2025 for corporation tax. From the 2025-26 tax year, a UK holiday let is taxed like any other residential let: mortgage interest only earns a 20% tax credit, new furniture no longer qualifies for capital allowances, the profit no longer counts for pension relief, and the trading-asset reliefs on a sale are gone. The first return under these rules is the 2025-26 Self Assessment return, due online by 31 January 2027, together with the tax.
General information based on HMRC guidance and UK legislation checked on 9 October 2026. It is not tax advice: residence, ownership structure, a company, or living in Scotland or Wales can change the answer, so confirm your figures with a tax adviser.
Since 1984, a UK property available for short-term letting for at least 210 days and actually let for at least 105 days a year, without significant long lets of over 31 days, was taxed almost like a trade. HMRC’s policy paper on the abolition lists the four advantages it brought: no finance cost restriction, capital allowances on furniture and equipment, access to the capital gains reliefs for trading assets, and profits counted as relevant UK earnings for pension relief.
Section 25 and Schedule 5 of the Finance Act 2025 removed those rules. The income tax changes apply from the 2025-26 tax year, the capital gains changes to disposals from 6 April 2025, and the corporation tax changes to accounting periods beginning on or after 1 April 2025. Your holiday let simply joins your UK property business, alongside any long-term lets, and goes on the ordinary UK property pages (SA105): HMRC’s 2025-26 notes confirm there is no separate FHL reporting any more. A holiday home in the EEA that qualified as an EEA FHL now belongs to your overseas property business.
Finance costs on a residential let (mortgage interest and the costs of getting the loan) are no longer deducted from rental profit. You enter them in box 44 of the UK property pages, and HMRC gives a tax reduction at the basic rate, 20%, on the lowest of three amounts: the finance costs, your property profits, and your adjusted total income above the personal allowance (HMRC manual PIM2058). Any part that cannot be relieved is carried forward (box 45).
Example: £8,000 of mortgage interest. Under FHL rules, a higher-rate taxpayer deducted it and saved £3,200 (40%). From 2025-26, assuming profits cover the interest, the same £8,000 gives a £1,600 credit: £1,600 more tax for the same year.
Capital allowances on furniture, white goods and equipment stop for new spending in periods of account beginning on or after 6 April 2025. Instead, you claim replacement of domestic items relief (box 36): the cost of replacing a sofa, bed, fridge, curtains or crockery with a like-for-like item. The first purchase of an item is not covered, an upgrade is relieved up to the like-for-like cost, and fixtures such as baths, washbasins or built-in cupboards fall outside it, although replacing them may count as a repair (PIM3210).
A transition rule protects what you already claimed: if you had an FHL capital allowances pool at 5 April 2025, the unrelieved balance moves into your property business pool and you keep claiming writing-down allowances on it (HMRC manual CA20025).
Unused FHL losses carry forward against future profits of your UK property business (Schedule 5, paragraph 16).
FHL income was an exception to the equal-shares rule for spouses and civil partners. From 6 April 2025 the standard rule applies: a married couple or civil partners who let jointly are taxed on equal shares, unless they own the property in unequal shares and both sign a declaration (Form 17) that matches their ownership (PIM4165, PIM1035).
Tax relief on personal pension contributions is capped at 100% of your earnings for the year. Holiday-let profits counted towards that cap until 2024-25; from 2025-26 they do not. If you paid into a pension in 2025-26 on the strength of your letting profit, check the relief: gov.uk warns that HMRC can ask you to pay back relief above the limit.
If your gross property income for the year is £1,000 or less, it is tax-free and you do not need to declare it. Above that, you can deduct the £1,000 allowance instead of your actual expenses. The allowance is capped at £1,000 across all your property businesses, and you cannot use it if you claim the finance cost tax reduction.
Since 6 April 2025 an FHL business is no longer treated as a trade for capital gains tax, so these reliefs no longer apply to it (HMRC manual CG73505):
An anti-forestalling rule closes the workaround: if an unconditional contract was signed between 6 March 2024 and 5 April 2025 but completed on or after 6 April 2025, these reliefs are refused unless the contract had no avoidance purpose, was either wholly commercial or between unconnected parties, and the claim says so (Schedule 5, paragraph 14).
Watch the payments on account. The two instalments paid in January and July 2026 were each half of your 2024-25 bill, worked out under FHL rules. If the abolition raised your tax, 31 January 2027 brings a larger balancing payment for 2025-26 plus a first payment on account for 2026-27 equal to half of the new, higher bill. Payments on account are not required if last year’s bill was under £1,000, or if more than 80% of it was collected at source (gov.uk, Self Assessment deadlines).
Making Tax Digital for Income Tax means keeping digital records and sending quarterly updates through compatible software, on top of the return. It depends on your qualifying income: gross self-employment and property income before expenses (your share only, for a jointly owned property). According to gov.uk:
The 2025-26 return you file this winter is the one HMRC reads to decide whether you need quarterly updates from April 2027. A holiday let grossing £32,000 a year crosses the line even if its profit is small.
If you live abroad for six months or more a year, HMRC treats you as a non-resident landlord, even if you are UK resident for tax purposes (gov.uk, Tax on your UK income if you live abroad). The FHL abolition applies to you in full, plus:
From 6 April 2027, property income gets its own income tax rates: 22% basic, 42% higher and 47% additional, and the finance cost credit rises to 22% (gov.uk policy paper of 26 November 2025, Finance Act 2026). The Scottish Parliament and the Senedd set their own property rates. The national registration scheme for short-term lets in England, expected from March 2027, is covered in our guide to UK short-term let rules for 2027.
Whatever tool you use, the return needs the same building blocks for each property: rents received between 6 April 2025 and 5 April 2026, costs such as platform commissions, cleaning and repairs, finance costs, and replacement purchases. Platform payout reports show when money reached you, which is what counts on the cash basis (available up to £150,000 of UK property income). Our guide to Airbnb taxes covers the wider picture.
If your bookings run through Nowistay, you can export them in a few clicks:
Each row includes the channel, dates, total amount, currency, nightly rate, cleaning fee and platform commission. Stays overlapping 5 or 6 April appear in the export, so allocate them as your accounting method requires, and cross-check bookings imported when you connected a channel, whose amounts can be incomplete. The steps and columns are in How to export your data from Nowistay. Direct bookings have no platform payout report, so the PDF invoice each booking can produce with your invoicing details doubles as an income record (Generate guest and owner invoices). To follow revenue per property all year rather than in January, see our guide to vacation rental KPIs.
Yes. The Finance Act 2025 (section 25 and Schedule 5) abolished it from 6 April 2025 for income tax and capital gains tax, and from 1 April 2025 for corporation tax. From the 2025-26 tax year, a holiday let is part of your UK or overseas property business and follows the same rules as any other residential let.
No. From 2025-26, finance costs are not deducted from rental profit. You report them in box 44 of the UK property pages and get a tax reduction at the basic rate of 20%, limited to the lowest of your finance costs, property profits and adjusted total income. Unused amounts carry forward. From 6 April 2027 the credit is given at 22%.
Not for new spending in periods of account beginning on or after 6 April 2025. You can claim replacement of domestic items relief when you replace furniture, appliances or furnishings like for like. If you had an FHL capital allowances pool, its unrelieved balance moves to your property business pool and writing-down allowances continue.
The 2025-26 Self Assessment return covers 6 April 2025 to 5 April 2026. It is due by 31 October 2026 on paper or 31 January 2027 online, and the tax must be paid by 31 January 2027. A first payment on account for 2026-27 is usually due the same day, with a second on 31 July 2027.
It depends on your qualifying income, which is your gross self-employment and property income before expenses. Above £50,000 in 2024-25 you should have started on 6 April 2026; above £30,000 in 2025-26 you start on 6 April 2027; above £20,000 in 2026-27 you start on 6 April 2028.
The FHL abolition applies to you in full. As a non-resident landlord, a UK letting agent must deduct basic-rate tax from your rent unless HMRC approves form NRL1i. You still file a return with the UK property and residence (SA109) pages, on paper by 31 October or through commercial software or an accountant by 31 January. British and EEA citizens keep the Personal Allowance.
If you live outside the UK for six months or more a year, a UK letting agent who collects your rent must deduct basic-rate tax, unless HMRC has approved your application on form NRL1i to receive the rent in full. Approval is refused if your returns or payments are late.
Yes. Gross property income of £1,000 or less is tax-free and does not need to be declared. Above that, you can deduct the £1,000 allowance instead of actual expenses, but not if you claim the finance cost tax reduction, and the total allowance across all your property businesses cannot exceed £1,000.
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Over 25 years of experience in real estate investing and a recognized expert in short-term rental automation. Bassel helps property managers increase revenue, cut operating costs, and deliver 5-star guest experiences using AI-powered tools he built from firsthand hosting experience.
