Furnished holiday lettings

The Government will abolish the Furnished Holiday Lettings (FHL) regime from April 2025.

If you intend to buy a property to let out as holiday accommodation you need to be aware of the impending changes.

Previously, running a property as a FHL could be a tax efficient way to let out a property. There are different rules for FHLs and other rental properties.

To qualify for FHL treatment certain conditions must be met. These include the property being available for letting for at least 210 days in each tax year and being actually let for 105 days.

A summary of the advantages and disadvantages can be found below:

Advantages

• Full tax relief is available for interest expenses incurred for FHLs unlike other rental lettings where interest relief is restricted.
• Capital allowances can be claimed on both integral features and furniture items.
• The business may be able to claim certain reliefs including Business Asset Disposal Relief (BADR), rollover relief and holdover relief.
• Profits from a FHL are treated as “relevant earnings” for pension contribution purposes unlike other rental or investment income.
• You will be able to take a holiday in your own property, or make it available some of the time to your family or friends. However, care would need to be taken to adjust the level of expenses claimed to reflect this private use.

Disadvantages

• Holiday letting may have higher agents’ fees, advertising costs, and maintenance fees (for example more regular cleaning).
• Owning a holiday property may be more time consuming than you think and you may find yourself spending your precious holiday sorting out problems.
• FHL businesses are within the scope of VAT so care needs to be taken where the owner of the FHL business is close to the VAT threshold or already VAT registered.

How TaxAssist Accountants can help

If you would like any further advice on the changes to the Furnished Holiday Lettings regime, speak to our experts. Get in touch with your local TaxAssist Accountant on 01463 242 667 or use our online contact form.

Date published 30 Jun 2017 | Last updated 4 Jun 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.