For decades, furnished holiday lets (FHLs) enjoyed tax treatment closer to a trading business than an ordinary rental. That ended on 6 April 2025. Holiday lets are now taxed like any other residential let, and owners who haven’t adjusted may be paying more than they expect — or claiming reliefs they no longer qualify for.
What the FHL regime used to give you
- Full deduction of mortgage interest, with no Section 24 restriction
- Capital allowances on furniture, equipment and fixtures
- Business Asset Disposal Relief and other business reliefs when selling
- Profits counted as relevant earnings for pension contributions
- Freedom for spouses to split profits in any ratio
What has changed since April 2025
1. Mortgage interest is restricted
Finance costs now get the same basic-rate tax credit as other residential lets under Section 24, instead of a full deduction. Higher-rate owners with a mortgage feel this most.
2. No new capital allowances
You can’t claim capital allowances on new spending. Existing pools of unrelieved expenditure can continue to be written down. Replacing furniture and appliances now uses replacement of domestic items relief instead.
3. Business reliefs on sale have gone
Business Asset Disposal Relief, rollover relief and gift relief no longer apply to holiday lets in the same way. Limited transitional rules can help if the business ceased before April 2025, so check your dates.
4. Pension contributions
Holiday let profits no longer count as relevant earnings, so they don’t support personal pension contributions on their own.
5. Joint ownership
Spouses and civil partners now follow the normal rules for jointly owned property. Income is split 50:50 by default, unless a Form 17 declaration reflects genuinely unequal ownership.
6. One property business
Holiday lets are now part of your ordinary UK (or overseas) property business. Losses can be set against profits from your other lets, and vice versa.
What still applies
- All revenue expenses — cleaning, changeovers, platform fees, utilities, insurance — are still allowable
- Holiday let income counts toward the Making Tax Digital for Income Tax threshold
- Business rates vs council tax rules depend on availability and letting days, not the old income tax test
- If you let a room in your own home, the Rent-a-Room scheme may apply
What to do now
- Re-run your numbers with Section 24 applied to your mortgage interest.
- Check whether you need a Form 17 if you own with a spouse in unequal shares.
- Review your pension contribution plans.
- If you’re thinking of selling, get advice on whether any transitional relief still applies.
- Check whether MTD for Income Tax now applies to you.
Our guide to Making Tax Digital for landlords covers the MTD side.
Holiday let accounts, sorted
SmartFiling’s ICAEW chartered accountants prepare holiday let figures under the new rules for a fixed fee. See our Landlord Accountant service or get a free quote.
Frequently asked questions
Is Airbnb income taxed differently now?
Whole-property short lets are taxed as ordinary property income. Letting a room in your own home may qualify for Rent-a-Room relief.
Can I still claim for furniture?
Yes, on replacements, through replacement of domestic items relief. Initial furnishing isn’t deductible.
Do I still need to file a tax return?
Yes, if your gross property income is over £1,000 or you have other reasons to file.
