Big Tax Changes for Short-Term Lets Across the UK
What You Need to Know for 2025–26
If you rent out a holiday home or short-term let—whether it’s in the Highlands, Cornwall, or anywhere in between—there’s a major tax change coming in April 2025 that could affect how much tax you pay and how you report it. And this affects individuals, companies, and trusts that own or sell FHL properties, whether in the UK or overseas.
From 6 April 2025, the UK Government is abolishing the Furnished Holiday Lettings (FHL) regime.
This means that from the 2025–26 tax year onwards, all rental income—short-term or long-term—will be taxed the same way.
Here is the HMRC guidance >> Abolition of the furnished holiday lettings tax regime - GOV.UK
This is a big shift for landlords who’ve benefited from the FHL rules, which offered some generous tax deductions.
Here’s what’s going away—and what’s replacing it:
No More FHL-Specific Tax Benefits
Mortgage interest: You’ll now only get basic rate relief (20%), not full relief.
Capital allowances: These are being scrapped. Instead, you’ll use Replacement of Domestic Items Relief for things like furniture and appliances.
Here is the link from HMRC website >> PIM3210 - Furnished lettings: Replacement of domestic items relief: 2016-17 onwards - HMRC internal manual - GOV.UK
This relief allows landlords to claim a deduction for the cost of replacing certain domestic items in a rental property.
Capital Gains Tax: No more Business asset disposal relief or roll over relief available for FHL properties.
Pension Contributions: In the past FHL income counted as relevant UK earnings for pension relief. This will no longer be the case. For example, if you made £20,000 profit from an FHL, you could contribute up to £20,000 into a personal pension and receive tax relief on it (subject to annual limits).
Self-Assessment tax return Changes
All rental income will now be reported under the UK Property section of your Self-Assessment return.
If your total property income is under £1,000, you might still qualify for the Property Income Allowance, but you’ll need to choose between that and claiming actual expenses.
All FHL income becomes part of your general UK or overseas property business. Any losses carried forward from an FHL can now be set against profits from other rental properties within the same category (UK or overseas). UK and overseas property businesses are treated separately—you can’t mix losses between them.
You still can’t offset property losses against general income (like employment or dividends). If your property business ceases entirely, you can’t carry forward the losses to a new business started later.
Food for thought 😊
HMRC can access data from platforms like Airbnb, Booking.com etc.
Under international and domestic data-sharing agreements, Airbnb and similar platforms are required to share information with tax authorities, including HMRC. This includes details such as:
Names and addresses of hosts
Total rental income earned
Dates and duration of stays
This data-sharing is part of HMRC’s broader effort to tackle tax evasion and ensure landlords are declaring rental income properly. In fact, HMRC has already used this kind of data in previous compliance campaigns to identify individuals who haven’t reported their Airbnb or short-term rental income.
So, if someone is letting out a property—even occasionally—it’s important to:
Keep accurate records
Declare all rental income on their Self-Assessment return
Understand what expenses can and can’t be claimed
What You Can Do Now?
Here are a few practical steps to take before the new rules kick in:
Review your letting strategy: Is short-term still the best fit for your goals?
Update your records: Make sure your bookkeeping reflects the new rules. Speak to us if you need any guidance.
Get advice if you need it: A quick chat with can help you make the most of the transition.