The UK government abolished the Furnished Holiday Lettings (FHL) tax regime on 6 April 2025, ending the special tax treatment for short-term rental properties. This major change has raised questions among FHL owners about what tax reliefs and allowances will still be available to them. While many benefits are being removed, certain FHL tax reliefs remain, though with updated conditions and limitations. In this article, we’ll explore what FHL owners can still claim in 2025 and how to make the most of the available tax benefits under the new regime.
What Changed in 2025 for FHL Tax Relief
The repeal of the FHL tax regime means that properties previously classified as FHLs are now treated as standard residential lettings for tax purposes. Capital allowances, Annual Investment Allowance (AIA), and enhanced capital allowances for energy-efficient items like solar panels are no longer available. Business Asset Disposal Relief (BADR) has also been withdrawn, and FHL income no longer counts as relevant UK earnings for pension contributions. These changes align FHLs with other property businesses, aiming to standardize tax treatment across the sector.
What You Can Still Claim in 2025 and Beyond
Despite the removal of several tax benefits, FHL owners can still access certain reliefs:
Replacement of Domestic Items Relief
This relief allows for deductions on the cost of replacing domestic items such as sofas, beds, fridges, cookers, carpets, and curtains. However, the relief applies only to replacement items and does not cover initial purchases or upgrades. The new item must be provided exclusively for rental purposes, and the old item must no longer be available for use by the lessee. Additionally, capital allowances should not have been claimed for the cost of the new domestic item.
Existing Capital Allowance Pools
For FHL businesses that had claimed capital allowances before 6 April 2025, the existing capital allowance pools remain. Owners can continue to claim writing-down allowances on the unrelieved balance over time. However, no new items or expenses can be added to the pool after the repeal.
Pre-April 2025 Expenditure
If costs were incurred before 6 April 2025 but not claimed in the 2024–25 tax return, owners may still be able to claim them. The deadline for submitting such claims is 31 January 2026, provided the expense was incurred before the regime ended.
What You Can No Longer Claim in 2025 as an FHL Owner
With the abolition of the FHL tax regime in 2025, several tax reliefs and allowances previously available to Furnishing Holiday Lettings owners have been removed. Below is a breakdown of what you can no longer claim:
- Capital Allowances: Starting in 2025, FHL owners will no longer be able to make new claims for capital allowances on new property purchases. This ends the ability to claim tax relief on the cost of furniture and equipment used for rental purposes.
- Annual Investment Allowance (AIA): The AIA, which previously allowed FHL owners to claim deductions on property improvements, is no longer applicable for property enhancements under the new rules.
- Mortgage Interest: Mortgage interest, once fully deductible, will now be limited to a 20% tax credit for FHL properties. This change reduces the tax relief owners can claim, resulting in potentially higher tax liabilities.
- Enhanced Capital Allowances: Tax reliefs for energy-efficient items including solar panels and energy-saving appliances will no longer be available under the new FHL rules, affecting FHL owners who previously claimed these deductions.
- Pension Contributions: As per the new rules, FHL income will no longer be considered relevant UK earnings for pension purposes, which means owners can no longer use this income to make pension contributions.
How to Successfully Claim Remaining FHL Tax Reliefs
Even though the Furnished Holiday Lettings (FHL) tax regime has been abolished, there are still ways to claim remaining reliefs. Here are the steps for both individual landlords and companies to ensure they claim what’s left under the new tax rules:
For Individual Landlords
1. Use the SA105 Form:
- When filing your Self-Assessment tax return, use the SA105 supplementary pages to report UK property income.
- Under the “Expenses” section, include costs for replacing domestic items as’ costs of replacing domestic items.
- Ensure the replacement item is of broadly the same quality and standard as the item it replaces to qualify for the deduction.
2. Existing Capital Allowance Pools: For capital allowances on items purchased before April 2025, continue to claim the writing-down allowance in the appropriate section of your return. These claims can continue until the remaining value is fully written off or a small pool claim is made.
For Companies
1. Use the CT600 Form: Companies should use the CT600 form when filing their Corporation Tax returns. Enter any ongoing capital allowance claims from the pre-2025 pool in the fixed assets section of the form.
2. No New Claims: Do not make new capital allowance claims for purchases made after April 2025, as the special FHL treatment no longer applies. Ensure that only pre-April 2025 claims are included to avoid making ineligible claims.
Important Notes: Keep clear and accurate records and receipts for all claims. These will help substantiate your claims in case of an audit or review.
In summary, the end of the FHL tax regime marks a significant shift in the taxation of short-term rental properties. While many tax advantages have been removed, certain reliefs remain available. FHL owners should review their records, consult with tax professionals, and adjust their tax strategies accordingly to navigate the new landscape effectively.
If you’re unsure about how these changes impact your tax filings, we’re offering a free consultation for landlords on self-assessment submissions. Reach out today to ensure you’re on the right track!
Frequently Asked Questions About Furnished Holiday Lettings (FHL)
Can I still claim capital allowances on Furnished Holiday Lets (FHL) after 2025?
No, new capital allowance claims are not allowed after 6 April 2025 unless they are for expenses incurred before that date.
What happens to my existing capital allowance claims for FHLs?
If you have an ongoing capital allowance pool, you can continue claiming writing-down allowances until the balance is fully used.
Can I claim for new furniture purchased for my FHL in 2025?
You can only claim for new furniture if it replaces an old item and qualifies under the Replacement of Domestic Items Relief.
Does Airbnb qualify as an FHL under the new tax rules?
Airbnb properties are now considered standard lettings. FHL status no longer applies for tax purposes.
What is the deadline to claim expenses incurred before 2025 for my FHL?
Claims for pre-April 2025 expenses must be submitted by 31 January 2026 as part of your 2024-25 tax return.
