Published 12/03/24

Owners of furnished holiday lets will lose their entitlement to favourable income tax, capital gains tax and capital allowances as the FHL scheme is abolished.

If you own a property that you rent out on a short term basis for holiday rentals, subject to certain qualifying conditions, you may benefit from the furnished holiday lets (FHL) regime. FHLs are properties that are let furnished with each let being no more than 31 days, available to let for 210 days a year and actually let for at least 105 days.

Eligible properties are taxed under special advantageous rules including:

• beneficial capital allowances; 

• mortgage interest deductible from rental income; and 

• capital gains tax reliefs not available to normal let properties.

From 6 April 2025 the FHL regime will be abolished so that short term and long term lets will be treated the same for tax purposes. This will eliminate the tax advantage currently enjoyed by landlords who let furnished properties to holidaymakers on a short term basis.

Individuals with FHL and non-FHL properties will no longer need to calculate and report income separately. If you own properties that you let out to holidaymakers, contact us to discuss whether you may be affected.

This article has been extracted from the Budget Spring 2024 Newsletter