Start with the honest bit: this page is information, not advice. FSM Management runs holiday lets. We do not do your tax return, and nothing here should be treated as a substitute for a qualified accountant. What we can do is set out plainly what changed, because owners keep asking and the answers online are a mess of half-updated blog posts.
The short version: the Furnished Holiday Lettings regime, the special tax treatment that holiday lets in the UK sat under for decades, was abolished from April 2025. Properties that qualified as FHLs no longer get their own separate set of rules. They now sit alongside other lettings under the general property business rules. The specific advantages that made an FHL different from a buy-to-let on a tax return were removed.
What the FHL regime actually was
FHL was not a loophole. It was a deliberate carve-out. If a property was furnished, available to let commercially for enough of the year, actually let for enough of the year, and not occupied by the same guest for long stretches, it could qualify as a Furnished Holiday Letting. HMRC then treated it more like a trade than a passive rental.
That “more like a trade” framing is the whole story. It is why the reliefs existed, and it is why removing the framing removed the reliefs in one go.
The qualifying tests themselves involved specific day counts and availability thresholds. We are deliberately not quoting them here, because they belonged to a regime that has been abolished and reproducing old numbers is how bad decisions get made.
The four things owners actually cared about
Ask an owner why FHL status mattered and you will usually get one of four answers.
Finance costs. How mortgage interest was treated for an FHL was different from how it is treated for a standard residential letting. For a highly geared property, that difference could be the difference between a profit and a loss on paper.
Capital allowances. FHLs could claim allowances on furniture, fixtures and equipment in a way ordinary residential lettings could not. If you had just spent heavily on furnishing a property to a high standard, that treatment mattered a great deal.
Pension-relevant earnings. Profits from an FHL were capable of counting as relevant earnings for pension contribution purposes. For owners using a holiday let as part of a retirement plan, this was often the quiet reason they held the structure.
Capital gains reliefs. Because the property was treated as a trading asset, certain capital gains reliefs were potentially available on disposal or on passing the asset on. This was frequently the single biggest number in the whole calculation, and the one that made owners tolerate the day-count tests.
| What FHL status carried | Where holiday lets sit now |
|---|---|
| Trade-like treatment of finance costs | Under the general property business rules, alongside other lettings |
| Capital allowances on furniture and fittings | Not on the old FHL basis; treatment of furnishing and replacement costs is a question for your accountant |
| Profits capable of counting as pension-relevant earnings | Not on the old FHL basis |
| Certain capital gains reliefs on disposal or transfer | Not on the old FHL basis |
| Separate day-count and availability qualifying tests | The separate FHL category itself is gone |
So what changed in practice
One category disappeared. That is the cleanest way to think about it. Before, a holiday let that passed the tests was its own species with its own rules. After, it is a property business like the others, and the reliefs that were attached to the species went with it.
For some owners this changes very little in cash terms. If the property is owned outright, was never generating capital allowances of any size, and is not part of a pension strategy, the practical impact on the annual return may be modest. For a leveraged owner who bought recently, furnished heavily, and was counting on the capital gains treatment on exit, the impact can be significant. The change did not hit all owners equally, and any blanket claim that it “kills holiday lets” or “changes nothing” is being made by someone who has not seen your numbers.
The question that actually matters now
Owners keep asking us the wrong question. They ask what the tax change means. The question that pays is: does this property still work after tax, for me?
That is an individual calculation with three moving parts.
- Revenue. What the property realistically takes across a year, not what a headline says. Nightly rate, occupancy and seasonality. We publish an indicative model, not measured data, in our guide to what a holiday let earns in Bournemouth, and a month-by-month view in Bournemouth occupancy and seasonality.
- Costs. Cleaning and linen on every changeover, platform commission, utilities, insurance written for short lets rather than for a residential tenancy, maintenance, management, and the money you spend on the property to keep it competitive.
- Tax. Which is now a question for someone qualified, applied to your income, your ownership structure and your borrowing.
Skip any of the three and you get an answer that feels precise and is wrong. If you are weighing this against a standard tenancy, the honest comparison lives on our holiday let vs long-term let in Bournemouth page, which sets the two models side by side without pretending one always wins. If you hold more than one property, our page for portfolio investors and the serviced accommodation vs buy-to-let comparison cover the same ground at portfolio scale.
What to ask your accountant
Take a list. Accountants are far more useful when you arrive with specifics.
- How is my holiday let income treated now, given how I own it and how I finance it?
- What happens to the finance costs on this mortgage, in my situation?
- What can I still claim when I replace furniture, and what is treated as capital?
- What is the position on losses I have carried forward from earlier years?
- Does anything change on disposal, and does that change how long I should hold?
- Was any part of my retirement planning relying on this income being relevant earnings?
- Would a different ownership structure change the answer, and would the cost of restructuring exceed the benefit?
- Given all of that, at what net revenue does this property stop being worth running?
That last question is the useful one. It converts a tax debate into a number you can actually manage against.
What records to keep
Whatever the rules become, the owners who cope best are the ones with clean records. That means booking-level revenue rather than a lump sum from a platform, commission separated out, every cleaning and linen invoice, every maintenance job with a date and a receipt, insurance and utility bills, mortgage interest statements, and a truthful record of the nights you used the property yourself.
If someone manages the property for you, this should arrive monthly without you asking. That is the point of an owner portal with proper statements and reporting. If you self-manage, a disciplined spreadsheet does the same job, provided you keep it up. Reconstructing a year of changeovers from memory in January is how deductions get missed.
Why this does not automatically make a holiday let a bad idea
The tax treatment changed. Guest demand on the south coast did not change because of it. What a two-bedroom flat within walking distance of the beach can charge in August is the same question it was before, and it is answered by the property, the photographs, the pricing and how many places guests can find it.
That is worth saying plainly, because the revenue side is the part most owners are leaving on the table. A property listed on one platform, priced flat across the year, competes badly against one that is distributed properly and priced to the calendar. If the tax outcome has narrowed your margin, the response that is actually within your control is to widen the gap between what the property takes and what it costs to run.
That is where we come in, and there are two honest doors. Fully managed at 15% of booking revenue means we run the property end to end: listing, distribution across every major channel, dynamic pricing, guest communication, and housekeeping and maintenance coordinated through vetted local partners. Or, if you would rather keep control and simply want more bookings, you can list on Flexiestays for 5%, keep managing the property yourself, and hire nobody. If you are still at the setting-up stage, the Dorset holiday let checklist and the guide to planning permission and licensing for short lets are the two things to read first.
One last thought. The owners who came through this change calmly were not the ones with the cleverest structure. They were the ones who already knew their numbers: what each month earns, what each changeover costs, what the property nets. If the last two years of your holiday let exist only as a bank balance and a vague feeling, fix that before you fix anything else. You cannot make a good decision about tax on a property you cannot describe in figures.