Furnished Holiday Let Profit
Furnished Holiday Lets (FHLs) occupy a unique position in UK tax law — they are treated as a trade rather than an investment, which grants access to several tax advantages not available to standard buy-to-let landlords. This calculator models the gross income, operating costs, and profit for an FHL property, and notes the key tax advantages that can significantly improve the after-tax return.
Why this matters
FHL tax advantages — including full mortgage interest deduction, capital allowances on furnishings, and the ability to count FHL income towards pension contributions — can substantially improve after-tax returns versus standard buy-to-let.
Key points
- FHL properties must be available to let for 210 days/year and actually let for 105 days/year
- FHL income qualifies for full mortgage interest deduction (not restricted by Section 24)
- Capital allowances on furnishings can be claimed in year one
- FHL income counts as 'relevant earnings' for pension contribution purposes
- Business Asset Disposal Relief (formerly Entrepreneurs' Relief) may apply on sale — 10% CGT rate
- FHL rules apply separately in the UK and the EU — HMRC changed the rules in April 2025
Frequently asked questions
What are the HMRC qualifying conditions for a Furnished Holiday Let?
The property must be furnished and commercially let. It must be available for short-term letting for at least 210 days in the tax year. It must be actually let for at least 105 days (15 weeks). No single letting can be for more than 31 consecutive days to the same tenant.
What changed with FHL tax rules in April 2025?
The government announced that the favourable FHL tax regime would be abolished from April 2025. Properties that previously qualified as FHLs will be treated as ordinary residential lettings, losing the full mortgage interest deduction, capital allowances, and pension contribution eligibility. Seek specialist tax advice.
Is an FHL better than a standard buy-to-let?
In the right location with strong occupancy, FHL was significantly more tax-efficient than standard buy-to-let, especially for higher-rate taxpayers. With the proposed abolition of FHL rules from April 2025, the calculation changes substantially. Model both strategies with current rules before committing.
Does an FHL property need to be in a tourist area?
No — FHLs can be anywhere in the UK or EEA that meets the letting conditions. However, achieving 105 days of actual letting is much easier in tourist destinations. Urban FHLs (city centre apartments) can also achieve the required let days through business travellers and short-break tourists.