The furnished holiday let regime is gone. It ended on 6 April 2025, and most advice online still predates that. A furnished holiday let accountant now spends less time on qualifying nights. Two questions take that time instead: whether your short stay income has crossed the VAT line, and whether the property should sit in a company.
Furnished holiday lets lost their special tax status on 6 April 2025. A holiday let is now taxed broadly like any other let. Mortgage interest gets a 20% credit, and capital allowances inside the property have gone. A holiday let accountant now works on the VAT position and the structure.
What's New in 2026 for Holiday Lets and Short Term Lets
The abolition of the furnished holiday lettings regime took effect on 6 April 2025. A holiday let, an Airbnb and a buy-to-let now sit under the same rules.
Two later dates matter. Business Asset Disposal Relief rose to 18% on 6 April 2026. From 6 April 2027, property income moves to its own rates of 22%, 42% and 47%.
All three push the same way. The property carries no tax advantage. Any advantage comes from how you hold it, which is where a holiday let accountant earns a fee.
Key Takeaways
- The furnished holiday let regime ended on 6 April 2025. Holiday lets are taxed as ordinary property income.
- Mortgage interest is no longer a deduction. Individuals get a 20% basic rate credit under Section 24.
- Capital allowances inside the let property have gone. Replacement of Domestic Items Relief covers replacements only.
- Short stay accommodation is standard rated for VAT, so gross bookings above £90,000 in a rolling year force registration.
- Letting a room in your own home can use Rent-a-Room relief of £7,500. A whole property cannot.
- A company deducts finance costs in full and pays 19% corporation tax on its first £50,000 of profit.
What Ended When the Furnished Holiday Let Regime Went
Four advantages disappeared on 6 April 2025. The cash effect sits in one of them.
The mortgage interest change is the one that moves money
Furnished holiday letting used to deduct finance costs in full. It now falls inside Section 24, like every other let. You are taxed on profit before interest, then given a 20% credit. For a higher rate taxpayer that halves the relief.
Capital allowances inside the property are gone, and a narrower relief replaces them
An FHL could claim capital allowances on beds, sofas, white goods and carpets. That route closed. What remains is Replacement of Domestic Items Relief, and the name is the rule. It covers the replacement of a domestic item, never the first purchase.
Furnishing a new holiday let gets no relief. Replacing those items later does.
The capital gains and pension advantages went with it
Trading treatment gave FHL owners capital gains tax reliefs on sale, including Business Asset Disposal Relief, now charged at 18%. Residential property is taxed at 18% or 24%, reported and paid within 60 days. Holiday letting profits also counted as relevant earnings for pensions. That no longer holds.
advice built on occupancy conditions, averaging elections or periods of grace describes a regime that no longer exists.
Airbnb, Serviced Accommodation and Rent to Rent: Four Businesses, One Tax Regime
The four short term let businesses share one income tax regime. They split on Rent-a-Room, VAT, and whether the activity is a trade.
Letting a room in your own home still gets £7,500 tax free
Rent-a-Room relief exempts the first £7,500 of receipts from letting furnished space in your main home. A spare room on a booking platform qualifies. A whole property does not. Platforms report host earnings to HMRC, so the income is on record before you declare it.
Serviced accommodation hits the £90,000 VAT threshold sooner than owners expect
Holiday accommodation is standard rated for VAT. Residential rent is exempt. Long term landlords can ignore VAT. Short-term operators cannot.
The VAT registration threshold is £90,000 of taxable turnover in any rolling 12 months. The test is gross booking income, not what reaches your account. Two busy units can cross it. The Tour Operators Margin Scheme applies to some supplies and changes the sum.
Rent to rent is a trade, not a property investment
A rent to rent operator holds a lease, not the freehold. The business buys space and resells it, so it is a trade and the same VAT rules bite. Margins are thin, so the accounting is company shaped from day one.
A holiday let let for enough nights pays business rates, not council tax
A self-catering property let for enough nights a year is valued for business rates by the Valuation Office, and council tax stops. It must be available to let and actually let, and thresholds differ across the UK. One property in England with a rateable value under £15,000 may get small business rate relief.
Worked Example: One Holiday Let, Two Tax Years
Rachel is an IT manager earning £60,000 with a cottage let to holidaymakers. It takes £34,000 a year. Running costs are £11,000 and mortgage interest is £9,000. The figures are illustrative.
In 2024/25, under the old FHL rules, interest was a deduction:
- Profit: £34,000 less £11,000 less £9,000, so £14,000
- Tax at 40%: £5,600
In 2026/27, after abolition, interest is a credit:
- Profit before finance costs: £34,000 less £11,000, so £23,000
- Tax at 40%: £9,200
- Credit at 20% of £9,000: £1,800
- Tax due: £7,400
Same rent, same costs, £1,800 more tax. The £4,000 she spent furnishing the cottage drew capital allowances in the earlier year. It draws nothing now.
Book a free consultation through the contact form. A holiday let accountant will explain whether a company is worth considering.
Why a Limited Company Usually Wins for a Holiday Let Business
A company is the better default for anyone borrowing and holding long term. Section 24 does not apply to companies, so Rachel's £9,000 of interest comes off in full. Corporation tax is 19% on the first £50,000 of profit, against 40% personally.
Abolition made that argument stronger. FHL status used to soften the personal position, so owners stayed in their own name. The cushion has gone, so a holiday let accountant starts with the structure.
The honest exceptions are narrow: an unmortgaged property, a short hold, or needing the rent as income now. Buying property through a limited company sets out the switching costs, which run one way.
What a Furnished Holiday Let Accountant Fixes That a Generalist Misses
A general practice sees a few short-term let clients yearly. A furnished holiday let accountant sees them weekly. Four errors repeat.
- Still filing as a furnished holiday let. The Self Assessment tax return deducts interest in full and ring-fences losses the old way. That understates the tax and invites a correction.
- Missing the VAT registration point. Turnover is tested on gross bookings. Register late and the VAT is due anyway, out of margin already spent.
- Claiming capital allowances that no longer exist. Furniture inside a let dwelling has not qualified since abolition.
- Never claiming Replacement of Domestic Items Relief. It sits outside the usual allowable expenses list, so a new fridge or sofa goes unclaimed.
Two raise the bill and two lower it. The fix starts with rental accounts that split booking income, platform fees and cleaning. That is why bookkeeping matters more on short lets.
Furnished Holiday Let Accountant FAQs
Allowable expenses are the running costs: cleaning, laundry, insurance, utilities, platform fees, repairs, plus council tax or business rates. Mortgage interest is not deductible now; it gives a 20% credit instead. Furniture gets relief only when you replace it, under Replacement of Domestic Items Relief.
There is no loophole, but there is a rule. A self-catering property available and actually let for enough nights a year is assessed for business rates, not council tax. Small business rate relief can then cut the bill. Night thresholds vary across the UK.
One property with tidy records and no mortgage rarely needs one. Short-term letting changes that. A holiday let accountant handles platform income, VAT exposure, business rates and the loss of furnished holiday letting status. Each sits outside a general practice's usual work.
Three legitimate levers reduce exposure to the higher rate. Move income to a spouse with unused basic rate band, where beneficial ownership genuinely differs. Make a pension contribution that widens the band. Or hold through a company that deducts interest in full.
Registration is compulsory once turnover passes the £90,000 VAT registration threshold in any rolling 12 months. Holiday accommodation is standard rated, so gross booking income counts, unlike exempt residential rent. Watch the rolling test, not your accounting year, because a strong summer can trigger it.
A company suits an owner who borrows and holds long term. It deducts finance costs in full and pays 19% corporation tax on its first £50,000 of profit. Holding personally suits a short hold, no mortgage, or living on the rent now.
Verdict on Hiring a Furnished Holiday Let Accountant
A furnished holiday let accountant earns their keep on any mortgaged short let, more so since April 2025. The property carries no tax advantage. What matters is the structure, the VAT position, and whether the return uses rules that still exist.
Three checks are worth making before 31 January. Whether your last return still treated the property as an FHL. Whether rolling bookings passed £90,000. Whether a company would deduct interest you now get 20% credit on.
the tax figures here cover England and Northern Ireland. Business rates rules differ across the UK.
Book a free consultation with a holiday let accountant through the contact form.
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