Guide summary

You must declare your holiday let income and pay tax as a standard residential letting from April 2025. Check if your property qualifies for business rates in England or Wales to pay lower taxes. Register for VAT if your taxable turnover from holiday lets exceeds £90,000.

Tax your holiday let as a standard residential letting from April 2025
Only claim 20% tax relief on mortgage interest costs
Stop claiming capital allowances – use Replacement of Domestic Items Relief
Selling a holiday let now pays standard residential CGT rates: 18% or 24%
Business Asset Disposal Relief is no longer available on most sales
Apply for business rates in England if let at least 70 days/year
Apply for business rates in Wales if let at least 182 days/year
Register for VAT if your holiday let turnover is £90,000 or more
Keep records of bookings and availability to prove business rates eligibility

Tax changes from April 2025

The special FHL tax regime was abolished from 6 April 2025 by section 25 of, and Schedule 5 to, the Finance Act 2025. Your holiday let is now taxed the same as other residential lettings.

Furnished Holiday Lets tax regime abolition 2025

Key dates and impacts of the FHL tax regime abolition from April 2025.

Abolition date (Income Tax/CGT): 6 April 2025
Abolition date (Corporation Tax): 1 April 2025
Treatment after abolition: FHL properties treated as standard residential lettings
Mortgage interest relief (post-abolition): Restricted to 20% basic rate tax credit
Capital allowances (post-abolition): No longer available - Replacement of Domestic Items Relief only
Pension contributions: FHL income no longer counts as relevant UK earnings
Business Asset Disposal Relief: No longer available unless business ceased before 6 April 2025

The FHL tax regime was abolished by section 25 of, and Schedule 5 to, the Finance Act 2025, to create a level playing field between short-term holiday lets and standard residential lettings. Existing capital allowance pools can continue to generate Writing Down Allowances until exhausted.

FHL regime abolition guidance (opens in a new tab)

What this means for you

Mortgage interest: If you're a higher rate taxpayer, only 20% tax relief (not full deduction)
Furniture: No capital allowances - only Replacement of Domestic Items Relief for like-for-like replacements
Pension contributions: Letting income doesn't count as 'relevant earnings'
Selling: Standard residential CGT rates, no Business Asset Disposal Relief

Historical FHL conditions (for reference)

These conditions applied until 5 April 2025. You may need them for previous tax years or transition claims:

FHL historical qualifying conditions (pre-April 2025)

Qualifying tests for FHL tax status valid until 5 April 2025.

Availability test: Property available for letting at least 210 days per year
Letting test: Property let commercially at least 105 days per year
Longer-term occupation limit: Lettings over 31 days must not exceed 155 days total
Single letting maximum: 31 consecutive days (for pattern of occupation test)
Applies until: 5 April 2025 (regime abolished 6 April 2025)

These conditions applied to tax years up to and including 2024/25. From 6 April 2025, the FHL tax regime no longer exists and these tests are no longer relevant for tax purposes.

Capital Gains Tax on sale

When you sell, you'll pay standard residential property CGT rates:

Capital Gains Tax rates on residential property 2026/27

CGT rates applicable to residential property disposals including former FHL.

Basic rate taxpayers: 18% on residential property gains
Higher/additional rate taxpayers: 24% on residential property gains
Effective from: 6 April 2024 (30 October 2024 aligned non-residential rates)
Former FHL properties: Standard residential rates apply from 6 April 2025

From 6 April 2025, FHL property disposals are subject to standard residential property CGT rates. Business Asset Disposal Relief (18% from 6 April 2026; 14% in 2025/26; 10% to 5 April 2025) is no longer available unless the FHL business ceased before 6 April 2025.

If your FHL business ceased before 6 April 2025 and you dispose of the property within 3 years, you may still qualify for Business Asset Disposal Relief:

Business Asset Disposal Relief rates 2026/27

Current and future Capital Gains Tax rates for Business Asset Disposal Relief (formerly Entrepreneurs' Relief).

Rate to 5 April 2025: 10%
Rate 6 April 2025 to 5 April 2026: 14%
Rate from 6 April 2026: 18%
Lifetime limit: £1,000,000 (gains since March 2020)

Important restriction: Business Asset Disposal Relief is not available on goodwill transferred to a close company where the transferor owns 5% or more of shares or voting rights after transfer. This means you cannot claim BADR on goodwill when incorporating your own business.

Business Asset Disposal Relief (opens in a new tab)

Business rates

Business rates eligibility is separate from the FHL tax regime - the rules haven't changed. Properties meeting availability and letting tests pay business rates instead of council tax.

This matters because you may get Small Business Rate Relief (100% for properties with rateable value of £12,000 or less, tapering to nil at £15,000).

England requirements

Wales requirements

Wales has higher thresholds - you need more letting days to qualify:

Apply for business rates

Check you meet the criteria

Review booking records for the required availability and letting days in the past 12 months.
Download the application form

Get the self-catering property application from GOV.UK.
Gather evidence

Collect booking confirmations, platform records (Airbnb, Booking.com), and calendar showing availability.
Submit to the Valuation Office Agency

Email specialist.rating@voa.gov.uk or use the contact options at gov.uk/contact-voa to submit your completed self-catering application.
Confirm annually

You must confirm each year that you still meet the requirements.

VAT on holiday accommodation

Holiday accommodation is standard-rated for VAT (20%). Register if your taxable turnover exceeds the threshold:

VAT on holiday accommodation

VAT treatment for holiday lets and short-term accommodation.

VAT rate: Standard rate (20%)
Registration threshold: £90,000 taxable turnover
Off-season exemption: Let as residential for 28+ days in clearly seasonal area is exempt
Overseas owners: No threshold - must register immediately for UK income

Holiday accommodation is standard-rated for VAT. Unlike hotels, there is no reduced value rule for long stays. If a property is let as residential accommodation for more than 28 days in an area where holiday trade is clearly seasonal, the entire let (including first 28 days) is VAT exempt.

VAT Notice 709/3 - Hotels and holiday accommodation (opens in a new tab)

Overseas owners: If you're VAT-registered overseas and receive UK rental income, register for UK VAT immediately - there's no threshold for overseas owners.

Legal basis

Primary legislation and key regulations

FA 2025 Primary 2025 · UK-wide Value Added Tax Act 1994 Primary 1994 · UK-wide Income Tax Act 2007 Primary 2007 · UK-wide Taxation of Chargeable Gains Act 1992 Primary 1992 · UK-wide

Browse UK legislation legislation.gov.uk

Official guidance

Completing the CT600A page for close company loans and arrangements to confer benefits on participators (opens in a new tab)

HMRC

Property business arrangements involving hybrid partnerships (Spotlight 63) (opens in a new tab)

HMRC

Business Asset Disposal Relief (opens in a new tab)

HMRC

Capital Gains Tax - what you pay it on (opens in a new tab)

HMRC

Capital Gains Tax rates (opens in a new tab)

HMRC

Capital distributions on dissolution (HMRC) (opens in a new tab)

HMRC

Holiday let tax obligations and business rates

Tax changes from April 2025

What this means for you

Historical FHL conditions (for reference)

Capital Gains Tax on sale

Business rates

England requirements

Wales requirements

Apply for business rates

Check you meet the criteria

Download the application form

Gather evidence

Submit to the Valuation Office Agency

Confirm annually

VAT on holiday accommodation

Legal basis

Official guidance

Related guides in this sector

FHL tax regime abolition - what's changed

Change from sole trader to limited company

Close a solvent company using Members' Voluntary Liquidation

Set up as a creative freelancer or studio

Accommodation regulations for hotels, B&Bs, and short-term lets