Holiday Let Tax – End of the road.
Big Tax Changes for Holiday Let Owners – What You Need to Know
If you run a furnished holiday let in North Wales, you’ve probably heard by now that the Furnished Holiday Let (FHL) tax rules officially ended in April 2025. This change affects how your property income is taxed—and it’s important to understand what’s different going forward.
So, what’s changed?
Until April 2025, properties that qualified as “Furnished Holiday Lets” enjoyed a few special tax perks. These included:
- Capital allowances – you could deduct the cost of things like furniture and equipment.
- Favourable capital gains tax treatment – including Business Asset Disposal Relief and rollover relief.
- Counting profits as ‘trading income’ – which could help with pension contributions and loss relief.
From April 2025, all of that is gone. Furnished holiday lets are now taxed in the same way as long-term residential lets.
What this means for you
1. Mortgage interest relief has changed
One of the biggest shifts: mortgage interest is now caught by Section 24 rules. That means you can no longer deduct the full amount of mortgage interest from your rental income.
Instead, you’ll get a basic rate tax credit (currently 20%) on your mortgage interest payments—regardless of your actual tax rate. If you’re a higher-rate taxpayer, this could significantly increase your tax bill.
2. No more capital allowances
You won’t be able to deduct the cost of furniture, fittings, or white goods from your taxable profits. You’ll need to use the regular “replacement of domestic items” relief instead, which is a bit less generous.
3. Selling? Expect more tax
When you sell your holiday let, it’s no longer treated as a business asset. This means you’ll likely pay more capital gains tax, and can’t claim things like Business Asset Disposal Relief.
4. Profits treated as rental income
Your holiday let profits are now considered passive income, not trading income. This might affect your ability to make tax-advantaged pension contributions or use trading loss relief.
5. Impact on planning and succession
The old rules made passing holiday lets on to family a bit easier tax-wise. With the FHL scheme gone, inheritance tax planning might be trickier, so it’s worth speaking to an adviser.
What should you do now?
- Review your tax position – A chat with your accountant is essential to understand how the changes affect your specific situation.
- Keep good records – Even though you can’t claim capital allowances, maintaining clear records will help with allowable expenses.
- Reassess your mortgage – If you’re still carrying significant borrowing on your property, it’s especially important to understand how Section 24 impacts your tax bill.
- Consider your long-term plans – Whether you continue letting, switch to longer-term rentals, or plan to sell, now’s the time to think strategically.
Need a hand?
If you’re based in North Wales and feeling unsure about what these changes mean for you, don’t hesitate to get advice. The rules may have changed, but there are still ways to make your holiday let work smartly for your finances.
Let’s weather the changes together—and keep making the most of what this beautiful region has to offer visitors!
hello@propertytax.wales