Furnished Holiday Lettings accounting, handled.
The FHL regime ended 6 April 2025. The tax planning that follows it is more important than the regime ever was.
Looking for an accountant for furnished holiday lettings after the FHL regime was abolished? From 6 April 2025 (1 April 2025 for companies), the special tax treatment for furnished holiday lets ended, so your holiday cottage, lakeside lodge or coastal Airbnb is now taxed as an ordinary UK or overseas property business. We are ACCA-qualified, give you a named accountant, and help former FHL owners adapt to the new rules, protect what reliefs remain, and avoid costly mistakes on the changeover.
What we get right for furnished holiday lettings.
- The capital allowances tap has been turned off
- Before April 2025 you could claim capital allowances (AIA, full expensing, writing-down allowances) on furniture, white goods and fixtures in a holiday let. After abolition that is gone, new furniture and furnishings only qualify for Replacement of Domestic Items relief, which gives relief on the replacement of an existing item, not the first purchase. If you held a capital allowances pool at the changeover you can keep claiming writing-down allowances on that existing pool, so we make sure your pool is carried over correctly rather than lost.
- Full mortgage-interest relief is gone, it is now a 20% tax reducer
- FHLs used to escape the finance-cost restriction, so you deducted 100% of mortgage interest against profit. From 2025-26 your interest relief is capped at the basic rate (a 20% tax reducer), exactly like a buy-to-let. For a higher-rate taxpayer with a geared holiday let, that materially increases the tax bill, and can push you into higher-rate or tip your taxable income over thresholds. We model the impact and review whether incorporation or restructuring is worth it.
- You have lost BADR, rollover and holdover on sale
- Selling a former FHL no longer attracts Business Asset Disposal Relief (the lower CGT rate), rollover relief or gift holdover. A disposal that would once have been taxed at the BADR rate is now taxed as a residential property gain. An anti-forestalling rule blocks attempts to lock in the old reliefs using unconditional contracts dated on or after 6 March 2024 where disposal is on or after 6 April 2025. We plan disposals around the £3,000 CGT annual exempt amount and the 60-day CGT reporting deadline.
- Your FHL losses are now more useful, not less
- One genuine upside: losses you carried forward from an FHL business can now be set against your wider UK property business profits (or overseas FHL losses against overseas property profits), instead of being ring-fenced to that one holiday let. We make sure those brought-forward losses are pooled correctly so they actually shelter your other rental income.
The full picture.
01Untangling the changeover year correctly
2024-25 was the last FHL year; 2025-26 is the first year under the ordinary property rules. Your holiday let business does not 'cease', it continues as part of your UK (or overseas) property business until you actually stop letting. We handle the continuity treatment so HMRC sees one continuing business, carry your capital allowances pool and brought-forward losses across, and split overseas FHLs from UK ones because their losses cannot be mixed.
02Mortgage interest, profit and the tax-reducer maths
We rework your numbers under the 20% finance-cost restriction, show the real after-tax position on each property, and flag where the restriction quietly increases your adjusted net income (which can affect the High Income Child Benefit Charge or personal allowance taper). Where gearing makes the restriction painful, we cost out the alternatives, joint ownership splits, or a company structure where interest is fully deductible against profits taxed at 19% up to £50,000.
03Replacement of Domestic Items relief done properly
With capital allowances gone, the day-to-day relief for sofas, beds, crockery and appliances comes through Replacement of Domestic Items relief. It only covers replacing an existing item, must be wholly for the tenants, excludes any element of improvement beyond a like-for-like upgrade, and is reduced by anything you get for the old item. We keep your asset records so every eligible replacement is claimed and nothing improvement-related is wrongly deducted.
04VAT once your holiday-let income grows
Holiday accommodation is standard-rated for VAT, unlike long residential lets, which are exempt. If your taxable turnover (across all your standard-rated activities, not just one cottage) exceeds £90,000 on a rolling 12-month basis you must register; the deregistration threshold is £88,000. We watch the rolling total, advise on the Flat Rate Scheme versus standard VAT, and make sure booking-platform commission and cleaning are handled correctly.
05Making Tax Digital for Income Tax is coming for landlords
MTD for Income Tax begins April 2026 for those with qualifying income over £50,000, April 2027 over £30,000, and April 2028 over £20,000, and property income counts. Former FHL owners with sizeable rental turnover will need to keep digital records and file quarterly. We get you onto Xero, QuickBooks, FreeAgent or Sage now so the switch is painless rather than a scramble.
06Pensions, joint ownership and whether to incorporate
FHL profits used to count as relevant earnings for pension contributions, that is gone, so if you were funding a pension from holiday-let income we revisit your contribution headroom. We also review beneficial ownership splits between spouses to use both sets of allowances and basic-rate bands, and run a proper incorporation comparison covering SDLT, CGT on transfer, the finance-cost benefit and the £500 dividend allowance before you commit.
First call to filed.
- 01
Discovery
Understanding your business needs.
- 02
Solution Design
Crafting your custom accounting strategy.
- 03
Onboarding
Quick and easy integration.
- 04
Regular Rhythm
Consistent monitoring and reporting.
Tax guides worth a read
Plain-English explainers, kept current with the latest HMRC rules.
Frequently asked questions.
No. The FHL regime was abolished from 6 April 2025 for income tax and capital gains tax, and from 1 April 2025 for companies. From those dates a holiday let is taxed as an ordinary UK or overseas property business, so the old advantages, full mortgage-interest relief, capital allowances on furniture, BADR/rollover/holdover on sale, and pensionable-earnings treatment, no longer apply.
Not on new purchases. Capital allowances on fixtures, furniture and furnishings ended with abolition. New or replacement furniture now goes through Replacement of Domestic Items relief, which only covers replacing an existing item like-for-like. If you already had a capital allowances pool at the changeover, you can keep claiming writing-down allowances on that existing pool until it runs down, we make sure it carries across rather than being lost.
From 2025-26 your finance and mortgage interest is relieved at the basic rate only, as a 20% tax reducer, exactly like a buy-to-let. You no longer deduct the full interest against profit. For a higher-rate taxpayer with borrowing, this usually increases the tax bill, which is why we model the effect and review whether a different ownership structure helps.
Good news here. Losses you carried forward from an FHL business are not lost, they can now be set against the profits of your wider UK property business (or, for an overseas FHL, against overseas property profits). Previously they were ring-fenced to that one holiday let. We pool them correctly so they shelter your other rental income.
Potentially yes. Business Asset Disposal Relief, rollover relief and gift holdover no longer apply to former FHLs, so a sale is taxed as a residential property gain rather than at the BADR rate. An anti-forestalling rule blocks attempts to bank the old reliefs through contracts dated on or after 6 March 2024 with disposal on or after 6 April 2025. We use your £3,000 annual exempt amount, plan timing, and handle the 60-day CGT return.
Holiday accommodation is standard-rated for VAT (unlike exempt long residential lets). If your total taxable turnover exceeds £90,000 on a rolling 12-month basis you must register; deregistration is possible below £88,000. Whether the Flat Rate Scheme or standard VAT suits you depends on your costs and platform fees, we run both and advise.
Fixed monthly pricing of £99, £199 or £499 depending on complexity, with no surprise bills, a 30-day money-back guarantee and a rolling monthly agreement. You get a named, qualified accountant who replies within 72 hours, and we work in Xero, QuickBooks, FreeAgent or Sage.
Stop overpaying tax. Start filing in 5 days.
Thirty minutes with an ACCA-qualified accountant. Most owners uncover £1,000-£3,000 in annual savings on the first call. If we are not the right fit, you walk away with a free tax review on the house.
