Life after the furnished holiday lettings regime: what changed for owners

12 March 2026 6 min read

Housekeeper finishing hotel-standard bed linen in a bright bedroom

The FHL tax advantages have gone. Here's what it means for interest relief, capital allowances and whether holiday lets still stack up.

For decades the furnished holiday lettings regime gave short-let owners a genuinely favourable tax position: full finance-cost deduction, capital allowances on furnishings, and treatment as a trade for certain capital gains and pension purposes. That regime has been abolished, and holiday lets now sit alongside ordinary property income.

It's a real change, and anyone who bought purely for the tax treatment should re-run their numbers. But the reaction we see most often - 'holiday lets are finished' - doesn't match what the arithmetic actually says.

What you've lost

Finance costs now attract a basic-rate relief restriction rather than full deduction
Capital allowances on furniture and equipment give way to replacement-of-domestic-items relief
Trading-style treatment for certain capital gains reliefs no longer applies
Profits no longer count as relevant earnings for pension contribution purposes

Why the case often still holds

Because the gross income gap was never a tax artefact. A well-run short let in a demand location generates substantially more revenue than the same property on an AST, and that gap survives the change. Owners with low or no borrowing feel almost nothing here, since the interest restriction is where most of the pain sits.

Ownership structure matters more than it used to as well. For higher-rate taxpayers with leverage, the conversation about incorporation is worth having properly - with an accountant, on your actual figures, not from a forum post.

Sensible responses

Review your borrowing costs against your net position. Keep meticulous records of replacement items so you claim what you're still entitled to. Push operational performance - pricing, occupancy and review score - because that's the lever you fully control. And get proper advice before restructuring anything.

The bigger picture

Government policy has been steadily removing the advantages that made property a passive investment. What's left rewards owners who run properties as operating businesses. That's precisely the direction professional short-let management has been heading anyway.

Services and pages mentioned in this article

Holiday Let Management - how the service works, end to end
Short Let Management - A fully managed short let service for landlords who want hotel-standard operations and two to three times the income of a standard tenancy - without touching the day-to-day.
Airbnb Management - End-to-end Airbnb management: we build and rank the listing, price it daily, screen every guest and run the turnarounds - so your calendar stays full and your reviews stay at five stars.
Management fee pricing - See exactly what our percentage-based fully managed service includes and costs.
Guaranteed rent - A fixed monthly figure paid whether the property is booked or empty.
Areas we cover - Chester, Manchester, Liverpool and more

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