Yes, the abolition took effect and it is a material change for holiday let owners. The furnished holiday lettings (FHL) regime was repealed from 6 April 2025 for Income Tax and Capital Gains Tax (from 1 April 2025 for companies), so your holiday let income and gains are now taxed in the same way as any other residential rental property. In practice that means:
- Finance costs. You no longer get full relief for mortgage interest. Loan interest is now subject to the finance cost restriction, giving a 20% basic rate tax credit, just like other landlords.
- Capital allowances. No more capital allowances on new expenditure on furniture and fittings. You can claim the replacement of domestic items relief instead when you replace items. If you already have an ongoing capital allowances pool, you can continue to claim writing-down allowances on it.
- Capital Gains Tax. FHLs no longer qualify as a trading business asset, so roll-over relief and business asset disposal relief are withdrawn, and access to gift relief has gone. Gains on sale are now taxed as ordinary residential property gains.
- Losses. Former FHL properties form part of your wider UK or overseas property business, so carried-forward losses can now be set against the profits of that whole property business rather than ring-fenced to the FHL business.
- Pensions. FHL profits no longer count as relevant UK earnings when working out your maximum pension relief.
Two transitional points worth knowing: an anti-forestalling rule applied from 6 March 2024 to stop people engineering a tax advantage before repeal, and the 210/105-day qualifying tests no longer matter from the abolition date. If you have brought forward losses or an existing capital allowances pool, it is worth sitting down with your accountant before filing your 2024/25 and 2025/26 returns so the transition is treated correctly.
