PIM4165 | Repeal of Furnished Holiday Lettings rules : Overview

The furnished holiday lettings rules cease to apply in tax years commencing on or after 6 April 2025 for Income Tax and for Capital Gains Tax, and 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.

Background to furnished holiday lettings

The current rules provide beneficial tax treatment for FHLs compared to other property businesses in broadly four key areas:

• the finance cost restriction rules do not apply;

• more beneficial capital allowances rules;

• access to reliefs from taxes on chargeable gains for trading business assets;

• inclusion as relevant UK earnings when calculating maximum pension relief.

Repeal changes

This change will remove the tax advantages that current FHL landlords have received by:

• applying the finance cost restriction rules so that loan interest cannot be deducted on residential property and only basic rate relief will be available (see PIM2058);

• removing capital allowances rules for new expenditure (see PIM3010) and allowing replacement of domestic items relief (see PIM3210);

• withdrawing access to reliefs from taxes on chargeable gains for trading business assets (see CG73500 and CG73505)

• no longer including this income within relevant UK earnings when calculating maximum pension relief (see Tax on your private pension contributions: Overview - GOV.UK).

Also, the normal rules will apply people who are married or in a civil partnership and who jointly let FHL property. From 6 April 2025 they are treated as entitled to receive equal shares of the income, unless they own the property in different shares and have made an election to be taxed according to their ownership share (see PIM1035).