Furnished holiday lets (FHL) will now be treated in the same way as other rentals when it comes to tax, with changes coming in from April 2025.

The plan to abolish the FHL tax regime was initially announced in the Conservative budget this spring, with the new Labour Government announcing detailed proposals to bring the plans forward as a priority.

Making the announcement the Government said the move ‘promotes fairness and aligns the tax rules for furnished holiday lettings with those for other property businesses’.

To qualify as a furnished holiday let, properties must be available for short-term letting to the public for 210 days and actually let for 105 days or more in each tax year and should not be used as a long-term let of over 31 days for significant periods.

What changes are being brought in?
The new rules will remove the tax advantages that current furnished holiday let landlords have received over other property businesses in four key areas by:
• applying the finance cost restriction rules so that loan interest will be restricted to basic rate for Income Tax
• removing capital allowances rules for new expenditure and allowing replacement of domestic items relief
• withdrawing access to reliefs from taxes on chargeable gains for trading business assets
• no longer including this income within relevant UK earnings when calculating maximum pension relief.