What does the abolition of the furnished holiday lettings (FHL) tax regime mean for Capital Allowances claims?

HMRC have published a policy paper outlining their plans to abolish the furnished holiday lettings (FHL) tax regime from April 2025.

The change had previously been announced by the then-Chancellor Jeremy Hunt in his Spring Budget 2024 speech, as a way of addressing housing concerns for local residents in popular tourist areas. The new Chancellor, Rachel Reeves, has carried forward these plans by unveiling draft legislation that will come into effect from 1 April 2025. The furnished holiday lettings scheme meant that properties rented out for short-term holidays received special tax treatment including claiming Capital Gains Tax Reliefs, profits counting as earnings for pension purposes, and plant and machinery Capital Allowances on items like furniture, fixtures, and equipment, which could significantly reduce a holiday let business’ tax bill.

As the special tax rules for furnished holiday lettings are ending, FHLs will be taxed the same as other rental properties, and owners won’t need to track their FHL income separately.

How do the changes to FHL properties impact Capital Allowances claims?

Now that the furnished holiday lettings tax regime is being abolished, businesses with FHL properties will no longer be eligible for more beneficial Capital Allowances treatment. Instead, they will be eligible for the standard ‘replacement of domestic items relief’ applied to other property businesses.

Where an existing FHL business has an ongoing Capital Allowances pool of expenditure, they can continue to claim writing-down allowances on that pool, but any new expenditure incurred on or after 1 April 2025 will fall under the standard property business rules.

How can Leyton help?

If you’re an owner of furnished holiday lets, we can help you with your claiming for Capital Allowances for expenditure on or before 31 March 2025.

Our team has specialist technical and tax expertise that allows them to uncover every asset eligible for tax relief. They can also give guidance on the most tax-efficient way of claiming for Capital Allowances to maximise your savings.

Get in touch today to find out how we can help.

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