PIM4140 - Furnished holiday lettings: special tax treatment of furnished holiday lettings
Source: gov.uk (2025-07-22)


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.

Furnished Holiday Lettings (FHLs) are treated slightly differently from other rentals for certain tax purposes

Capital allowances

FHLs are treated as a trade for the purposes of giving capital allowances. FHL businesses are entitled to capital allowances on the furniture, white goods, etc. within the property but non-FHL businesses do not qualify for these capital allowances. For more information on capital allowances – what items qualify and how to work out the allowance – read Helpsheet 252 Capital allowances (https://www.gov.uk/government/publications/capital-allowances-and-balancing-charges-hs252-self-assessment-helpsheet) and balancing charges. There are no capital allowances for the cost of the property itself or the land on which it stands.

Capital Gains Tax (CGT)

CGT rules are applied to FHLs as if they were a trade. You can get more information on how CGT rules apply to FHLs in the following helpsheets:

Helpsheet 275 Business Asset Disposal Relief. (https://www.gov.uk/government/publications/entrepreneurs-relief-hs275-self-assessment-helpsheet)

Helpsheet 290 Business Asset Rollover Relief. (https://www.gov.uk/government/publications/business-asset-roll-over-relief-hs290-self-assessment-helpsheet)

Helpsheet 295 Relief for gifts and similar transactions. (https://www.gov.uk/government/publications/relief-for-gifts-and-similar-transactions-hs295-self-assessment-helpsheet)

Helpsheet 296 Debts and Capital Gains Tax (https://www.gov.uk/government/publications/debts-and-capital-gains-tax-hs296-self-assessment-helpsheet) (This helpsheet includes information on relief for loans to traders, here the relief is for the person who makes the loan).

Pensions relief

FHL profits count as relevant UK earnings for pension purposes.

Finance and interest costs deductibility

The finance costs and interest restrictions set out in PIM2 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2050)050 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2050) onwards do not apply to loans/mortgages taken out in respect of furnished holiday lettings

Replacement of Domestic Items Relief

Please note that ‘replacement of domestic items relief’ (set out in PIM3210 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim3210)) is not available for FHLs.

Historic special treatments

Previously, other special treatments have been available to FHLs. For a list of these, please see PIM4150 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4150).

Property no longer a Furnished Holiday Let

If a customer’s property doesn’t qualify as a FHL or stops being a qualifying FHL, the special tax treatment will no longer apply. They will need to work out any balancing allowance or balancing charge for capital allowances (see CA23210 (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23210)) and any Capital Gains Tax reliefs will be affected (see CG63950P (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg63950p) onwards in respect of entrepreneurs relief; CG60250C (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg60250c) onwards for business asset roll over relief; CG66450C (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg66450c) onwards for gifts and similar transactions; and CG50200C (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg50200c) onwards for securities and shares).