Changes to the Furnished Holiday Lettings tax regime

Currently, owners of Furnished Holiday Lettings (FHLs) are eligible for certain tax reliefs on their property income if they meet criteria relating to their property, and the occupancy patterns. If the criteria are satisfied, they can avail themselves of tax breaks usually available to traders, although FHLs are not considered to be trades. Provision for this is made in the Income Tax (Trading and Other Income) Act 2005.

The regime was introduced in 1984, to clarify confusion as to whether letting holiday accommodation short-term constituted a trade. In their 2009 Budget the Labour Government announced it would abolish the tax regime (PDF). However, the incoming Coalition Government did not pursue this, opting instead to tighten some of the eligibility requirements.

At the March 2024 Budget, then Chancellor Jeremy Hunt announced the regime would be abolished from 1 April 2025, with legislation to be published in due course. Reaction to the measure was mixed in the Commons. Several MPs supported the measure when it was announced in the Budget, and many others expressed concern in a Westminster Hall debate on the issue in May 2024. Media reaction has also been mixed, with some branding the measure as a ‘staycation levy’, and others reporting positive reaction from residents in tourist hotspots.

Upon taking office, the Labour Government announced it would continue to pursue this policy, and that the government would abolish the FHL regime from April 2025. Legislation on this will be included in the upcoming Finance Bill, to be published following the Autumn Budget, which will take place on 30 October.