Furnished Holiday Let Abolition Impact Calculator

The FHL rules ceased to apply for tax years beginning on or after 6 April 2025 for Income Tax and Capital Gains Tax, and from 1 April 2025 for Corporation Tax and corporation tax on chargeable gains. So the 2024/25 tax year was the last one under the old regime, and every year since has been taxed under the ordinary property income rules. Your holiday let income is now simply part of your UK property business, pooled with any other rental income you have, and reported on the same pages of your tax return.

HMRC identifies four areas of beneficial treatment that have gone. One: exemption from the finance cost restriction, so mortgage interest was fully deductible and now is not. Two: the more generous capital allowances rules, replaced by replacement of domestic items relief. Three: access to the capital gains reliefs available to trading businesses — business asset disposal relief, rollover relief, gift holdover relief, relief for loans to traders and the substantial shareholdings exemption. Four: treatment of the profits as relevant UK earnings for pension purposes. There is no grandfathering. The 90-day availability and 105-day letting tests no longer matter, because qualifying no longer buys you anything.

Because it changes the mechanism, not just the rate. Under the FHL rules interest came off your profit before tax, so a higher-rate taxpayer effectively got 40% relief and an additional-rate taxpayer 45%. Now interest is not deductible at all. Instead you get a tax reduction worth 20% of the lowest of three figures: your finance costs, your property business profits, and your adjusted total income above the personal allowance. For a higher-rate taxpayer with £12,000 of interest, that is the difference between £4,800 of relief and £2,400 — £2,400 a year, on the same mortgage. There is a second sting: because interest no longer reduces your profit, your reported income goes up, which can push you into a higher band, erode your personal allowance above £100,000, or trigger the High Income Child Benefit Charge.

It is the relief that ordinary landlords have had since April 2016, and it is narrower than capital allowances in two ways that matter. First, it only covers replacements — the initial cost of furnishing a property gets no relief at all, whereas the Annual Investment Allowance previously gave 100% relief on that first fit-out. Second, it is like-for-like: if you replace a basic oven with a range cooker, you can only deduct what an equivalent basic oven would have cost, though a genuine modern equivalent such as a more energy-efficient fridge is not treated as an improvement. Any proceeds from selling or part-exchanging the old item are deducted from the claim. It covers movable furniture, furnishings, household appliances and kitchenware; it does not cover fixtures such as a fitted kitchen or a boiler, which are repairs to the property instead.

Yes, on the pooled expenditure. HMRC has confirmed that where expenditure was already in a capital allowances pool by 5 April 2025, writing down allowances, balancing allowances and balancing charges can continue to be claimed on that pool after abolition. What you cannot do is add new expenditure on furniture, furnishings or equipment to it — from 6 April 2025 that spend falls under the ordinary property business rules, which means replacement of domestic items relief or nothing.

For almost everyone, yes. BADR is not available on a disposal of an FHL business made on or after 6 April 2025. The only route left was to have actually ceased the business before that date — genuinely ceasing, not merely stopping taking new bookings — and then to dispose of the assets within 3 years of cessation, which closes that door in the spring of 2028. It is worth knowing the loss is smaller than it once was. BADR was 10% for disposals up to 5 April 2025, 14% for 2025/26, and is 18% for disposals from 6 April 2026. Main CGT rates are 18% within the basic rate band and 24% above it. So today the loss of BADR costs a higher-rate taxpayer 6 percentage points, and a basic-rate taxpayer nothing at all.

Both are gone for holiday lets, because the activity is no longer treated as a trade. Rollover relief cannot apply where the replacement asset is acquired on or after 6 April 2025 for holiday letting purposes, so the familiar plan of selling one holiday cottage and rolling the gain into another no longer works. Gift holdover relief on a transfer to family is likewise unavailable, which means passing a holiday let to your children is now a disposal at market value with tax due immediately. Where you sold before abolition and rolled the gain into a genuine trade asset, the earlier claim stands. Watch the anti-forestalling rule: for unconditional contracts entered into on or after 6 March 2024 that complete after abolition, any rollover, gift or BADR claim must include a statement confirming the conditions are met.

FHL profits used to count as relevant UK earnings, which is the figure that caps how much you can pay into a pension with tax relief. Ordinary property income has never counted. If the holiday let was your main source of income, this is a significant and often overlooked change: your tax-relieved contribution capacity falls to £3,600 gross a year (£2,880 net) unless you have employment or self-employment income elsewhere. If you do have a salary, that salary still sets your limit, up to the £60,000 annual allowance, and nothing changes for you here.

They survive, and they are more flexible than they were. Losses carried forward from the FHL business, and any loss made in the final year, become losses of your ongoing UK property business — or your overseas property business for an overseas FHL. Previously an FHL loss could only be set against future FHL profits from the same business, which made them easy to strand. Now they can be set against profits from any of your UK property, so a loss from the holiday cottage can shelter profit from a buy-to-let. UK and overseas remain separate streams, and they cannot be pooled together.

A few things, none of them dramatic. Review the mortgage: because interest relief is now capped at 20%, a highly geared holiday let is a much weaker proposition than it was, and repaying debt now produces a better after-tax return than it used to. If the property is jointly owned with a spouse or civil partner, check whether the profit split matches the beneficial ownership — an unequal split has to be declared on Form 17 and backed by the actual ownership shares. Consider whether the incorporation numbers stack up, remembering the stamp duty and CGT costs of transferring, and that companies are outside the finance cost restriction entirely. And if you were relying on a capital gains relief for an exit, get the sums redone: the plan may still work, but it now works differently.