Furnished Holiday Let Tax 2026/27 — After FHL Abolition
What actually changed on 6 April 2025
The Furnished Holiday Lettings (FHL) tax regime, which for decades gave holiday-let owners a genuinely better tax deal than standard buy-to-let landlords, was abolished from 6 April 2025. FHL owners now follow the same rules as any other residential landlord, which means a narrower set of reliefs and, for most, a noticeably higher tax bill from the 2025/26 tax year onward.
The three things you actually lost
- Full mortgage interest relief — FHL owners could previously deduct 100% of mortgage interest as a business expense. That’s gone; you now get the same 20% Section 24 tax credit as every other landlord
- Capital allowances — the ability to deduct the full cost of furnishing and equipping a holiday let in the year of purchase has ended for new spending from 1 April 2025. If you have an existing capital allowances pool from before that date, you can keep claiming writing-down allowances on it, but nothing new qualifies
- 10% Business Asset Disposal Relief on sale — also abolished. Selling a former FHL property now attracts standard residential Capital Gains Tax rates: 18% for basic-rate taxpayers, 24% for higher-rate taxpayers, instead of the previous 10% rate
What’s still ahead
Two further changes are worth planning around. Making Tax Digital for Income Tax is now in force for landlords with property income over £50,000, requiring quarterly digital reporting rather than one annual return. And a property-specific Income Tax rate increase has already been legislated to take effect from April 2027, adding a further squeeze on top of the FHL changes already in place.