Furnished holiday let rules abolished - what was actually lost
- Full interest deduction → 20% credit - the biggest cash change for leveraged owners: higher-rate taxpayers with meaningful mortgages feel this immediately
- Capital allowances ended - furniture, equipment, and integral features no longer generate new allowances; replacement-of-domestic-items relief applies instead
- Pension treatment gone - profits no longer count as relevant UK earnings, cutting the pension contributions they can support
- CGT reliefs withdrawn - the FHL routes to Business Asset Disposal Relief, rollover, and gift holdover on the property closed; disposals now face residential CGT at up to 24%
- Jointly owned flexibility reduced - profit splits for married couples revert to the standard property rules rather than the FHL freedom
Holiday let tax changes UK - your first post-FHL return
The holiday let tax changes UK owners are confronting this filing season are mechanical but expensive. Income and expenses now report as ordinary property income - merging with any other rentals into one property business. Finance costs come out of the expense line and reappear as the 20% tax credit, which for a higher-rate taxpayer with £20,000 of annual interest is a swing of roughly £4,000 a year against the old treatment. Losses follow property-business rules. And if you are over the MTD threshold, this income now sits inside quarterly digital reporting too - the regime covered in our making tax digital for landlords guide.
Switch holiday let to buy to let UK - the pivot most owners are weighing
Switch holiday let to buy to let UK conversions trade seasonal gross income for year-round certainty - and in many locations the post-FHL maths now favours the boring option.
What the switch involves in practice:
- Honest revenue comparison - peak-season gross minus voids, changeovers, platform fees, and management often lands near a 12-month AST net
- Mortgage consent or remortgage - holiday-let mortgages prohibit ASTs; switching means lender consent or a remortgage onto a standard buy to let mortgage
- The Renters’ Rights Act applies - the AST world is now the periodic-tenancy world: information sheets, Section 13 rent reviews, and the compliance stack
- Council tax and licensing - short-let licensing regimes and second-home council tax premiums are pushing the same direction in tourist areas
- Furniture decisions - letting furnished vs clearing for unfurnished changes both the tenant market and the replacement-items relief position
Switch holiday let to buy to let UK - the revenue comparison, the remortgage step, and the compliance stack waiting on the AST side.
Continuing short stays - the serviced accommodation route
Plenty of strong holiday properties should keep doing exactly what they do - the location earns it. The financing side has its own market: a serviced accommodation mortgage UK lenders offer prices on short-let income (typically assessed on accountant-verified trading figures or projected occupancy), and the specialist lender pool is deeper than most owners assume. The tax ambition some owners pursue - running genuinely hotel-like operations as a trade - is a high evidential bar with real substance requirements; take advice before building a structure on it. For most, the honest position is simpler: a good short-stay business, ordinarily taxed, properly financed, in a location that out-earns an AST even after the regime’s death.
Selling - and what the buyers look like
The third option is disposal - now at residential CGT rates of up to 24%, with the FHL reliefs gone, which argues for planning the sale across tax years and both spouses’ positions rather than reacting. The buyer pool tells the market story: investors are purchasing former holiday lets to convert to standard rentals in yield-strong areas, funded with bridging finance where the property needs work or speed, refinancing onto term products once tenanted. Sellers exiting and buyers pivoting are two sides of the same post-FHL trade - and both sides need the finance structured before the deal, not after.
Disclosure: Money Pilot Ltd (FRN: 968705) is an Appointed Representative of Yellow Stone Finance Group Ltd which is authorised and regulated by the Financial Conduct Authority (FRN: 814533). Yellow Stone Finance Group Ltd is a credit broker not a lender. Money Pilot Ltd is Registered in England and Wales No: 13621432. You should always make sure you are able to afford any repayments as late or missed payments can affect your credit rating and access to future finance.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
