PIM4175 - Repeal of Furnished Holiday Lettings rules : treatment of FHL losses for 2024-25 onwards
Source: gov.uk (2025-04-02)


The furnished holiday lettings rules cease to apply in tax years commencing on or after 6 April 2025 for Income Tax and for Capital Gains Tax, and 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.

Existing rules – Income Tax

ITA07/83-88 and ITA07/96-101

As explained at PIM4 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4120)120 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4120), PIM4 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4200)200 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4200) and PIM4230 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4230), if a customer’s FHL business makes a loss it can set it against FHL profits of a later year. A loss in a UK FHL business can only be carried forward against a profit of the same UK FHL business. Likewise, a loss in an EEA FHL business can only be carried forward against the profits of the same EEA FHL business.

A customer cannot set the losses of one FHL business against the profits of the other if they have both a UK and an EEA FHL business. In addition, a customer cannot set losses of a FHL business against the profits of a non-FHL property business.

Treatment of losses after repeal – Income Tax

Any losses incurred by the FHL in the current year or carried forward from previous years will be treated as losses of the ongoing UK or overseas property business going forward. This means the losses can be set off against other property income for individuals.

A loss carried forward from a UK FHL can be set off against the UK property business income in 2025-26 and later tax years.

A loss carried forward from an overseas FHL can be set off against the overseas property business income in 2025-26 and later tax years.

Example

Rashid has owned and rented out a UK furnished holiday let for 2022-23, 2023-24, and 2024-25. He made a loss of £500 in 2022-23, a loss of £750 in 2023-24 anda profit of £500 in 2024-25. He has a loss to carry forward of £750 into 2025-26 from the FHL business.

Rashid also rents out a flat to students from 2023-24 onwards. He made profit of £6,000 in 2023-24 and a profit of £8,000 in 2024-25.

As the FHL rules have been abolished from April 2025 the £750 FHL loss carried forward is now part of Rashid’s ongoing UK property business that includes the former FHL and the student let. Rashid will now be able to set the carried forward losses of £750 against any profit from the former FHL and the student let in 2025-26.

Existing rules – Corporation Tax

As explained at PIM4 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4230)230 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4230)

A loss made in a UK furnished holiday lettings business may only be carried forwards for use against profits of that same UK FHL business in a future accounting period (CTA10/S45 and S65).

A loss made in an EEA furnished holiday lettings business may only be carried forwards for use against profits of that same EEA FHL business in a future accounting period (CTA10/S45 and S67A).

A loss made in an overseas property business (excluding any loss arising from an EEA FHL business as above) can only be carried forwards for use against profits of that same overseas property business in a future accounting period (CTA10/S66).

A loss made in a UK property business (excluding any loss arising from a UK FHL business as above) must first be set against the company’s total profits for that accounting period (CTA10/S62(3)).

Treatment of losses after repeal – Corporation Tax

Any losses incurred by the FHL in the current year or carried forward from previous years will be treated as losses of the ongoing UK or overseas property business going forward. This means the losses are subject to the provisions for UK and overseas property businesses (s62-64 CTA2010). See PIM4235 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4235).

Example

Rashid Property Ltd operated an FHL in 2024-25 that made a loss of £1,000. The company also made a trading profit of £10,000 in 2024-25. In 2024-25 the company reported the trading profit and the FHL loss carried forward of £1,000.

In 2025-26 the company operated the holiday accommodation and made a loss of £500 and made a trading profit of £10,000. The company can set off the carried forward loss of £1,000 and the loss incurred in 2025-26 of £500 against the company’s total profit of £10,000 in 2025-26.