Food, Drink & Hospitality Property letting

Holiday let tax obligations and business rates

Tax obligations and business rates for self-catering holiday accommodation from April 2025. Covers the FHL regime abolition, capital gains tax on sale, business rates eligibility in England and Wales, and VAT on holiday accommodation.

UK-wide
Guide summary

From April 2025, holiday lets are taxed like residential properties. Check if you must pay business rates based on booking days. Register for VAT if your holiday let income exceeds £90,000.

  • Pay standard residential tax rates from 6 April 2025
  • Claim 20% tax credit on mortgage interest, not full relief
  • Use Replacement of Domestic Items Relief, not capital allowances
  • Pay 18-24% capital gains tax when selling your property
  • Check if you qualify for business rates in England or Wales
  • Prove 70-182 let days per year for business rate relief
  • Register for VAT if turnover exceeds £90,000
  • Keep booking records to show holiday let days
  • Apply for business rates via Valuation Office Agency
  • Complete annual checks to keep business rates status
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UK-wide

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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.

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:

Capital Gains Tax on sale

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

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 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

  1. 1

    Check you meet the criteria

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

  2. 2

    Download the application form

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

  3. 3

    Gather evidence

    Collect booking confirmations, platform records (Airbnb, Booking.com), and calendar showing availability.

  4. 4

    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.

  5. 5

    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:

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.