If you rent a property on Airbnb or similar platforms, you may have heard of the furnished holiday let (FHL) regime. Until April 2025, this was a specific tax classification that came with significant advantages for short-term let hosts. That regime has now been abolished, and if you were previously operating as an FHL, your tax position has changed.
This guide explains what the old rules were, what has replaced them, and what Airbnb hosts need to do now.
What Was a Furnished Holiday Let?
Under the old rules, a furnished holiday let was a residential property that met all three of the following conditions:
- Available for commercial letting for at least 210 days per year
- Actually let for at least 105 days per year
- Not let to the same tenant for more than 31 consecutive days for more than 155 days per year
Properties that met these thresholds were treated differently from standard residential lets for tax purposes, with a more generous set of reliefs available.
What Tax Benefits Did FHL Status Provide?
Before April 2025, FHL properties qualified for:
- Full mortgage interest deduction — landlords could deduct 100% of mortgage interest as a business expense, unlike standard residential landlords who are restricted to a 20% tax credit
- Capital allowances on furniture, fixtures, and equipment — allowing deductions for items like beds, sofas, and appliances
- Business Asset Disposal Relief on sale — potentially reducing the Capital Gains Tax rate on disposal to 10%
- Profits counting as relevant UK earnings for pension contribution purposes
These reliefs made the FHL classification genuinely valuable, particularly for higher-rate taxpayers with mortgaged properties.
The FHL Regime Was Abolished From 6 April 2025
HMRC abolished the Furnished Holiday Let regime from 6 April 2025. From that date, all former FHL properties are treated in the same way as standard residential lets. The key consequences are:
- Mortgage interest can no longer be deducted in full — you now receive a 20% tax credit on interest costs, the same as other residential landlords
- Capital allowances are no longer available for new expenditure on furniture and equipment — instead, you can use Replacement of Domestic Items Relief for like-for-like replacements
- Business Asset Disposal Relief no longer applies to disposals of former FHL properties
- Profits no longer count as relevant earnings for pension contribution purposes
The full detail is confirmed on gov.uk/guidance/furnished-holiday-lettings.
How Does This Affect Your Tax Bill?
The impact depends on your circumstances, but for many Airbnb hosts the abolition means a higher tax bill. The most significant effect is on hosts who had mortgages on their short-term let properties. Under the old FHL rules, the full mortgage interest could be deducted before calculating profit. Under the new rules, you only receive a 20% credit, which is worth far less if you pay Income Tax at 40%.
For example, if your mortgage interest is £10,000 per year, under the old rules a 40% taxpayer would save £4,000 in tax. Under the new credit system, the saving is £2,000 regardless of your tax rate — a direct increase of £2,000 in the annual tax bill.
What Can You Still Claim?
The abolition of the FHL regime does not remove your ability to claim standard rental expenses. Airbnb hosts can still deduct:
- Cleaning fees and housekeeping costs
- Guest consumables
- Airbnb platform fees
- Property repairs and maintenance
- Buildings and contents insurance
- Utilities paid by the host
- Management and accountancy fees
- Replacement of Domestic Items Relief for like-for-like furniture replacements
For a full breakdown of what you can claim, see our guide to Airbnb host expenses UK.
Should You Review Your Property Structure?
For some hosts, the abolition of FHL status makes it worth reviewing whether holding the property personally or through a limited company is more tax efficient. Limited companies pay Corporation Tax rather than Income Tax, and can still deduct mortgage interest in full as a business expense. However, there are costs and complexities involved in moving a property into a company, and this is not the right move for everyone.
If you’re considering this, professional advice is essential before taking any action. HMRC’s Check Employment Status for Tax tool won’t help with this decision — what you need is a proper tax planning conversation.
What If You’re Considering Selling?
If you were planning to sell a former FHL property and were expecting to benefit from Business Asset Disposal Relief at 10% CGT, that option is no longer available following the abolition. Disposals are now subject to standard Capital Gains Tax rates for residential property, which are currently 18% for basic rate taxpayers and 24% for higher rate taxpayers. Timing and structure of a sale can still make a significant difference to the CGT bill, so getting advice before agreeing a sale is worthwhile.
Get Specialist Help
The abolition of the FHL regime is the most significant change to short-term let taxation in years. If you haven’t yet reviewed how it affects your position — or if your last tax return still reflected FHL rules — it’s worth getting this looked at properly.
At Simplr Accounting, we work with Airbnb hosts and short-term let clients across the UK. We can review your current setup, model the impact of the rule change, and make sure you’re not overpaying.
Read our guide to tax for Airbnb hosts UK, visit our accountant for Airbnb hosts page, or book a free discovery call.