From April 2025, changes to furnished holiday lettings (FHL) in the UK will bring about new rules that look set to reduce or remove some of the tax benefits that landlords have enjoyed for years. We have been monitoring these developments to help our clients prepare in good time. Below is a clear breakdown of the changes, their potential impact and the steps you might consider before the start of the 2025/26 tax year.
The current FHL regime and what is changing
Right now, FHL properties can benefit from certain allowances, such as capital allowances on furnishings and equipment. For a property to qualify, it must be available to let for at least 210 days each year and actually let for at least 105 days. This status opens the door to beneficial tax treatments that do not apply to standard residential lets.
However, the legislation scheduled for April 2025 will reduce or remove many of these benefits. The government aims to ensure that holiday lettings are run as genuine businesses, rather than being used mainly for personal holidays while still claiming tax perks. Based on recent draft proposals, owners who fail to meet stricter letting conditions in the 2025/26 tax year could lose out on most or all of the existing reliefs.
Implications for landlords
The proposed changes mean that many owners of holiday properties will need to reassess their business model. Some will find that they no longer meet the new thresholds and will be moved to standard residential property taxation rules. This could result in higher tax bills and less favourable access to deductions.
In addition, if you own more than one holiday property, you might find that only some of them remain eligible. Should one property satisfy the requirements but another fall short, that second property may lose its FHL status. You would then have different tax treatments across the same portfolio, which can be more complicated to manage.
Potential financial impact
For many FHL owners, these changes could mean an increase in annual tax liabilities from the 2025/26 tax year onward. Here are some scenarios.
- Loss of capital allowances: If your property no longer qualifies, you might not be able to claim capital allowances on furnishings or equipment, increasing your overall taxable profits.
• Restrictions on mortgage interest relief: FHL owners currently enjoy more advantageous relief on finance costs compared to standard buy-to-let landlords. Losing FHL status could lead to bigger tax bills if the property is highly leveraged.
• Potential national insurance considerations: Some owners who run their holiday let as a business register for Class 2 national insurance. If you lose business status, your national insurance payments could change.
According to HMRC data, around 140,000 properties in the UK meet the FHL criteria at present. This number might shrink if the new requirements come into effect without transitional measures, which will have an impact on overall annual revenue for many landlords.
What owners should consider before April 2025
In light of the planned adjustments, we recommend that owners review their letting practices now. If your property is close to meeting the required letting thresholds, think about practical steps to increase occupancy. Changes might include the following.
- Adjusting pricing: Some owners find that a slight drop in high-season pricing can attract more guests and boost annual bookings.
• Marketing strategies: Investing in digital adverts or working with a local tourism network may bring in the extra bookings needed to maintain FHL status.
• Extending the open season: If your property is usually closed during off-peak months, opening it for select winter weekends or weekdays might lift overall letting days.
If you expect that you will lose FHL status, speak to an accountant about whether any form of restructuring could help manage your new tax obligations. For example, some landlords consider operating under a company structure. Keep in mind that any decision to incorporate should factor in legal, tax and administrative costs.
Practical advice on the next steps
1. Evaluate your projected letting days
Make realistic estimates of how many days your property will be let out in the 2025/26 tax year. If these projections fall short of the new threshold, you may need to increase occupancy or accept the standard property tax rules.
2. Update your business plan
If you plan to maintain FHL status, focus on practical methods to boost guest numbers. Those who wish to convert to a normal residential let or mixed usage will need a different strategy altogether.
3. Plan for a possible drop in tax relief
Review your outgoings, consider ways to improve cashflow and explore whether your mortgage arrangements remain competitive if your tax position changes. If you feel uncertain, speak with a professional.
4. Seek professional guidance
We are here to break down the numbers and help you work through your options. Our first principle thinking means we look at the root elements of your business, identify where you stand and suggest clear strategies for you to follow.
At Fairman Keable, practice, we have guided many clients through changes to furnished holiday lettings rules in the past. The upcoming 2025 changes add a fresh layer of detail, so getting an early start will allow you to adjust your business effectively. You can also explore Fairman Keable’s knowledge base for additional information on property taxes and general financial planning.
Closing thoughts
The changes to FHL rules from April 2025 could result in the end of certain tax advantages for many property owners. While this might mean more complex requirements for some, with the right planning, you can adapt to the new structure and protect your profits. The key is to act now, review your business model and take practical steps to meet the qualification criteria if you wish to maintain FHL status. We are here to support you every step of the way.
Contact us to schedule a consultation. Our team is ready to help you make informed decisions about changes to furnished holiday lettings that will keep your property business on the right track.