Furnished Holiday Lets (FHLs) enjoy special tax treatment compared to standard residential lettings. If you rent out a property that meets certain criteria, you may be able to claim significant tax advantages. This guide explains the FHL rules, eligibility criteria, and the changes coming in 2026.
For a complete overview of property tax obligations, see our main Property owners and landlords page.
What is a Furnished Holiday Let (FHL)?
A Furnished Holiday Let is a property that is:
- Let out to the public for short periods (typically weekly).
- Furnished to a standard that allows guests to stay comfortably.
- Available for letting for at least 210 days a year.
- Actually let for at least 105 days a year.
- Not let to the same person for more than 31 days in a row for more than 155 days in a year.
Eligibility Criteria for 2026
To qualify as an FHL, your property must meet the following conditions:
Availability Test
The property must be available for letting to the public as holiday accommodation for at least 210 days in the tax year.
Occupancy Test
The property must be actually let for at least 105 days in the tax year.
Pattern of Occupation Test
The property must not be let to the same person for more than 31 consecutive days for more than 155 days in the tax year.
Furnished and Equipped
The property must be furnished and equipped to a standard that allows guests to occupy it comfortably (e.g., beds, cooking facilities, etc.).
Important: For the tax year 2026-27, the government is consulting on proposals to modernize the FHL rules, including potentially introducing a new ‘qualifying holiday let’ regime. These changes could affect the eligibility criteria and tax advantages.
Tax Advantages of Furnished Holiday Lets
FHLs receive more favourable tax treatment than standard residential lettings:
1. Capital Allowances
You can claim capital allowances on fixtures and fittings (e.g., furniture, kitchen equipment) in an FHL. This allows you to claim a larger deduction than the standard wear and tear allowance.
2. Mortgage Interest Relief
Unlike standard residential lettings, you can deduct the full mortgage interest from your rental income. See our guide: Mortgage Interest Relief for Landlords.
3. Business Asset Disposal Relief (Formerly Entrepreneurs’ Relief)
When you sell an FHL property, you may be eligible for Business Asset Disposal Relief. This means you pay Capital Gains Tax at 10% on the gain, rather than the standard CGT rate of 18% or 24%. See our guide: Capital Gains Tax for Landlords.
4. Pension Contributions
Income from FHLs counts as ‘relevant UK earnings’ for pension purposes. This means you can make pension contributions based on your FHL income.
5. Loss Relief
If you make a loss on your FHL, you can set it against your other income (e.g., employment income), whereas losses from standard lettings can only be set against future rental income.
How to Qualify: A Practical Guide
- Keep Detailed Records: You need to prove the property was available and let for the required days. Keep a diary of bookings and enquiries.
- Market the Property: Advertise the property to the public through platforms like Airbnb, Booking.com, or a letting agent.
- Meet the Furnishing Standard: Ensure the property is fully equipped and maintained to a good standard.
- Monitor Occupancy: Track the days the property is actually let.
The 2026 Consultation: What’s Changing?
The government is consulting on modernizing the FHL rules. Proposed changes may include:
- Replacing the FHL regime with a new ‘qualifying holiday let’ regime.
- Potential changes to the eligibility tests (e.g., length of the letting period).
- Changes to the tax advantages (e.g., capital allowances, mortgage interest relief).
It’s important to stay up to date with these changes. Our team can advise you on how any new rules affect you. For broader tax updates, see our HMRC Self Assessment Guide.
How We Can Help
Our ACCA-qualified accountants can:
- Advise you on whether your property qualifies as an FHL.
- Help you claim the full tax advantages available.
- Assist you with record-keeping for the occupancy tests.
- Keep you updated on the 2026 changes.
Maximise the benefits of your furnished holiday let.
📚 Related Guides
• Property owners and landlords
• Mortgage Interest Relief for Landlords
• Capital Gains Tax for Landlords
• Rental Income Tax Guide
• Landlord Tax Return Guide
• HMRC Self Assessment Guide
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