Tax news · June 2026
From April 2025 the special tax treatment for furnished holiday lets was abolished. Here is what owners have lost, who it affects, and our advice on what to do.
Owners of holiday lets have lost a valuable set of tax breaks. From April 2025 the special furnished holiday lettings regime was abolished, and properties that once enjoyed their own favourable treatment are now taxed like any other residential let. If you own a holiday let, this changes your tax position in several ways, and it is worth understanding what you have lost and what you can still do.
For many years a furnished holiday let that met the letting conditions was treated almost like a trade. Owners could claim capital allowances on furniture and equipment, deduct all of their mortgage interest, count the profit as earnings for pension contributions, and access certain capital gains tax reliefs when they sold. From April 2025 all of that special treatment ended. Holiday lets have been folded into the ordinary property income rules that apply to other landlords.
This affects anyone who lets a furnished holiday property, whether a single cottage or a small portfolio. The most noticeable change for many is mortgage interest. Like other landlords, holiday let owners now only get a 20 per cent tax reduction for their finance costs rather than a full deduction, which increases the bill for higher rate taxpayers in particular. The loss of capital allowances and of the pension treatment also bites for some owners.
The first step is to recalculate your position under the new rules so there are no surprises, especially if you have a mortgage on the property. It is worth reviewing whether the let still suits your plans, whether a change of ownership makes sense, and making sure you claim everything that is still available, such as replacement of domestic items relief. If you were relying on the holiday let income counting towards your pension contributions, you will need to look at that separately.
This was a meaningful loss for holiday let owners, and it landed on a sector that was already under pressure. Our honest view is that holiday lets can still be worthwhile, but the tax no longer does any of the heavy lifting, so the decision now has to stand on the letting income itself. We would not rush into selling purely because of the tax change, but we would strongly suggest every owner reworks their numbers under the new rules, because the difference for a higher rate taxpayer with a mortgage can be significant. There may also be ownership structures that help, which are worth exploring properly rather than guessing at.
We rework your holiday let figures under the new rules, make sure you claim every relief that remains, and advise on whether a change of ownership or structure would help. Book a free call back and we will look at your property properly.
The special tax regime ended in April 2025. You can still let a holiday property, but it is now taxed under the ordinary property income rules, without the old capital allowances, full interest relief and special capital gains reliefs.
Like other landlords, you now get only a 20 per cent tax reduction for your mortgage interest rather than deducting it in full, which raises the tax bill, especially for higher rate taxpayers.
We will rework your figures under the new rules and advise on the best way forward. Book a free call back and we will look at your property.