Furnished Holiday Let Abolition Calculator: Old Rules vs Now

The furnished holiday let (FHL) tax regime was abolished from 6 April 2025 (1 April 2025 for companies). Holiday lets are now taxed like any other residential letting: mortgage interest is no longer deducted from profits but replaced by a 20% basic-rate credit (the “Section 24” rule that buy-to-let landlords have lived with since 2020), capital allowances on new furniture and equipment stop (replacement-of-domestic-items relief applies instead), the profits no longer count as relevant earnings for pension contributions, and the FHL-only Capital Gains Tax reliefs — business asset disposal relief at 10%, rollover and gift holdover relief — fall away for disposals after the change. This calculator puts a number on the first of those: the extra income tax you pay every year because interest is no longer deductible.

How the calculator works

• Old rules: taxable profit = receipts − running costs − finance costs; taxed at your marginal rate on top of your other income.
• New rules: taxable profit = receipts − running costs (finance costs excluded), taxed at your marginal rate; then a credit of 20% of the finance costs is knocked off the bill — but the credit is capped at 20% of the lower of your finance costs, your property profits, and your total income above the personal allowance. Anything unused carries forward.
• Scottish taxpayers: Scottish bands apply to the income, the 20% credit is fixed by UK law.

Why the bill can jump into a higher band

Because interest is added back before tax is calculated, your taxable income rises even though your cash profit has not. A higher-rate taxpayer with £12,000 of interest loses the 40% deduction (£4,800) and gets a 20% credit (£2,400) instead — £2,400 a year more tax on exactly the same business. Basic-rate taxpayers can be pushed over the higher-rate threshold, lose child benefit through the high-income charge, or see their personal allowance tapered above £100,000, none of which the old FHL rules triggered.

What did not change

• You still declare the income on the property pages (SA105) and can still claim running costs, agent and platform fees, repairs and replacement of domestic items.
• Losses carry forward against future property profits.
• Existing capital-allowance pools carry on until written down; new expenditure after the abolition date goes through the replacement relief instead.

The CGT side, if you sell

Gains on holiday lets sold after the change are taxed at the residential rates — 18% and 24% — rather than the 10% business asset disposal relief rate the FHL regime allowed. Transitional rules preserve some reliefs where the qualifying conditions were met before the abolition; take advice before completing a sale. Our CGT calculator shows the 18/24% split and the 60-day reporting deadline.

Should a holiday let now be in a company?

Companies deduct interest in full and pay Corporation Tax, which is why the abolition revived the incorporation question. The limited company vs personal calculator runs both routes side by side and includes the one-off cost of moving a property in.

Abolition dates and the Section 24 mechanics re-checked against gov.uk on 4 September 2026 (research/2026-09-04). General information, not advice.