Why it matters
What Furnished Holiday Let (FHL) means for a landlord
The holiday let regime was the last part of residential letting outside Section 24, so owners could deduct mortgage interest in full and claim capital allowances and business reliefs. It ended in April 2025. Advice written before then about moving into holiday lets to keep interest relief is now wrong. Transitional rules apply to existing capital allowance pools, so the question for owners is whether short-term letting still pays after tax.
Worked example
How it plays out
Fiona lets a cottage in Cornwall to holidaymakers. Until April 2025 she deducted all £6,000 of her mortgage interest as an expense. From the 2025 to 2026 tax year she instead gets a basic-rate tax credit of £1,200. As a higher-rate taxpayer, her tax on the cottage rises by about £1,200 a year before any other changes.
Common mistakes
Where landlords go wrong
- 01Following pre-2025 advice to move into holiday lets for interest relief.
- 02Claiming capital allowances on new furniture without checking the transitional rules.
- 03Assuming business reliefs on a future sale still apply automatically.
What to do
A short checklist
- Re-run your holiday let figures with the basic-rate interest credit.
- Ask an accountant how the transitional rules affect any capital allowance pool.
- Compare the after-tax return of short lets with long lets.
Sources
Checked against these sources on 16 September 2026. A guide to the rules in England, not legal advice: for a dispute or a possession claim, speak to a solicitor.
