A tax guide for furnished holiday lettings

The UK’s special Furnished Holiday Let (FHL) tax regime ended in April 2025. Holiday rentals are now taxed under standard property income rules, which changes how owners approach profitability and strategy.

Owning a holiday rental in the UK used to come with specific tax advantages if the property qualified as a Furnished Holiday Let. From April 2025, that separate regime was abolished. Holiday lets are no longer treated as a distinct tax category and now fall under the same framework as other rental properties. For the official explanation of how this applies to income tax and corporation tax, see HMRC’s guidance on the abolition of the furnished holiday lettings tax regime.

If you are looking for furnished holiday lettings a tax guide in 2026, the real focus is understanding what changed, what still applies to earlier tax years, and how this affects your short-term or mid-term rental model. For owners reassessing their strategy in light of the new rules, structured property management for short-term rentals can help align operations, occupancy, and yield under the updated tax landscape.

What changed after April 2025

Let’s remove the confusion straight away.

The repeal of the FHL regime did not mean:

• You can’t run a short-term rental.
• You must switch to long-term tenants.
• Holiday lets are now “illegal”.

What changed is the tax treatment, not the business model.

Under the old regime, qualifying FHLs were treated more like trading businesses for certain tax purposes. That opened the door to:

• Full mortgage interest deductions
• Capital allowances on furniture and fixtures
• Certain capital gains reliefs
• Pension contribution advantages

Most of those advantages no longer apply. Again, the government’s position is clearly set out in HMRC’s FHL abolition policy paper.

In simple terms: holiday letting income is treated like other UK property income. That means:

• You calculate profit under standard property business rules.
• Finance cost relief works the same way as it does for other landlords (for individuals, typically restricted to the basic rate).
• Capital allowances are no longer available on new purchases for holiday lets.

For multi-unit owners, this shift is significant. The more leveraged your portfolio, the more the finance cost restriction matters to your net yield.

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What used to qualify as a furnished holiday let

Even though the FHL regime has ended, the qualification rules still matter for:

• Previous tax returns
• Amendments
• Ongoing enquiries
• Portfolio restructuring based on historic data

Under the old rules, a property had to meet specific conditions.

1. Availability condition

It had to be available for commercial letting for at least 210 days in the tax year.

2. Letting condition

It had to actually be let commercially for at least 105 days.

3. Pattern of occupation

Longer stays of over 31 consecutive days were restricted in how they counted. These weren’t “guidelines” – they were measurable thresholds. If you owned more than one qualifying property, you could use the averaging election and period of grace election explained in HMRC’s FHL helpsheet (HS253) to smooth performance across units. For portfolio operators, that averaging election was often critical. One underperforming unit could be offset by stronger occupancy elsewhere.

Today, those tests don’t unlock special tax perks anymore. But if you’re reviewing 2024–2025 or earlier tax years, they still matter.

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How holiday let income is treated now

Post-repeal, your holiday rental forms part of your UK property business.

That means:

• Rental income is aggregated with other UK rental income.
• Normal allowable revenue expenses can still be deducted.
• Finance cost relief for individuals follows the same rules as other landlords.

This is where many owners feel the difference. Under the old FHL regime, mortgage interest was fully deductible when calculating taxable profit. Now, individual landlords typically receive relief at the basic rate instead. HMRC outlines this clearly in the technical note on post-repeal finance cost treatment. If you run multiple properties, the impact compounds. Yield projections based on “old FHL maths” may no longer reflect reality.

This is also where strategy starts to matter more than slogans like “short-term earns more”.

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Allowable expenses: what you can still deduct

The good news is that everyday running costs remain deductible as revenue expenses – provided they’re wholly and exclusively for the rental business.

Typical allowable expenses include:

• Utilities
• Cleaning and laundry
• Repairs and maintenance
• Insurance
• Platform and management fees
• Advertising
• Guest consumables

The rules themselves haven’t become stricter – but record-keeping discipline matters more when the special regime disappears. For multi-unit owners, poor documentation isn’t just messy. It’s expensive.

If your short-term rental operation is structured, consistent, and professionally managed, the admin side becomes dramatically easier – which is why many portfolio owners transition into property management for short and mid-term stays once scale kicks in.

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VAT: The threshold that catches growing portfolios

VAT is where holiday letting behaves differently from long-term residential letting. Holiday accommodation is generally standard-rated for VAT when VAT applies. The VAT registration threshold is currently £90,000 of taxable turnover in any rolling 12-month period. You can verify the current threshold directly through HMRC’s VAT registration guidance.

Important nuance: the abolition of the FHL regime did not change VAT rules. This is confirmed in HMRC’s clarification on FHL abolition and VAT treatment.

For single-property hosts, VAT may never be relevant. For multi-unit operators, it absolutely can be. Once you cross the threshold, pricing strategy, invoice structure, and even guest mix start to matter differently.

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Business rates, local taxes and municipal rules

Tax isn’t just national. For short-term rentals, local rules often matter more. In the UK, self-catering properties may fall under business rates rather than council tax if they meet availability and occupancy thresholds.

For example, in England a property must be available for at least 140 nights and actually let for at least 70 nights in the previous 12 months to qualify. But here’s the bigger picture.

Across Europe and beyond, cities increasingly differentiate between:

• Long-term residential rental
• Short-term holiday accommodation
• Serviced or corporate housing

Barcelona, Amsterdam, Paris, London, Dubai – all operate under different combinations of licensing, occupancy caps, or registration systems.

The global lesson is simple: short-term rental tax planning without checking local compliance is incomplete planning.

If you operate multiple units across regions, local tax classification and municipal rules can directly affect:

• Your net yield
• Your ability to scale
• Your eligibility for certain tax treatments
• Whether your income is considered business activity or passive property income

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The London 90-night rule – and why it matters globally

Greater London is often used as a reference case. Under the London short-term letting restriction, properties are generally limited to 90 nights per calendar year unless planning permission is obtained.

This is commonly referred to as the airbnb 90 day rule, which sets a clear annual cap for short-term rentals in the capital.

Why mention this in a global guide? Because similar caps now exist in many cities worldwide. And caps change the tax equation.

If you’re limited to 90 nights:

• Your revenue ceiling changes.
• Your VAT exposure may shift.
• Your pricing model must adjust.
• Mid-term rental strategies become more relevant.

Tax doesn’t exist in isolation. It reacts to regulation.

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Short-term vs mid-term rentals: where the strategy shifts

Short-term rentals (typically under 30 nights) are usually treated as hospitality-style income in many jurisdictions. Mid-term rentals (30+ nights, often 1–6 months) can start to resemble residential leasing in legal and tax terms.

This distinction matters globally:

• In some countries, long-term residential leases are VAT-exempt while holiday stays are not.
• In others, tenant protection laws activate after a certain length of stay.
• In some markets, corporate housing is taxed differently from tourism accommodation.

Mid-term rental strategy can help owners:

• Reduce turnover costs
• Smooth seasonality
• Avoid local night caps
• Lower operational intensity

But it must be structured correctly. If you pivot toward 1–6 month stays without understanding how it affects tax classification, tenant rights, and reporting obligations, you’re not optimising – you’re gambling.

That’s why many operators formalise mid-term as a product category rather than an ad-hoc extension of short stays through mid-term rental management strategies.

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Multi-unit portfolios: where tax becomes operational

For single-property hosts, tax is an annual event. For multi-unit operators, tax is the outcome of operations.

The larger the portfolio, the more these factors matter:

• Consistent accounting structure across units
• Clear segmentation of short-term vs mid-term income
• Proper expense allocation per property
• Financing structure (personal vs corporate ownership)
• VAT threshold monitoring

After the repeal of the UK FHL regime, losses and profits from holiday lets form part of the broader property business.

HMRC clarifies this in their FHL abolition technical documentation:

Globally, similar principles apply: once special regimes disappear, your portfolio lives or dies by clean accounting and disciplined operations.

That’s why serious operators don’t just think about “how much can I charge per night?” They think about:

• Structure
• Scalability
• Compliance resilience
• Administrative friction

When portfolio growth meets regulatory complexity, owners often move into structured property management for short and mid-term portfolios rather than managing compliance reactively.

When does VAT become a scaling problem?

Globally, VAT (or GST) systems tend to trigger once revenue passes a threshold.

In the UK, that threshold is currently £90,000.

You can confirm the live threshold via HMRC’s VAT registration page:

But similar thresholds exist worldwide:

• EU member states have their own VAT registration levels.
• UAE applies VAT to hospitality services.
• Australia and New Zealand apply GST to accommodation services.
• Many jurisdictions require foreign platform reporting.

Once you cross the threshold:

• Pricing must account for VAT-inclusive vs VAT-exclusive positioning.
• Input VAT recovery becomes relevant.
• Margin calculations change.
• Platform payouts and invoice formatting matter.

For multi-unit operators, this is not a minor detail. It’s a structural shift.

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Capital gains and exit planning

Even though the FHL regime is gone, exit planning still matters.

Under the previous rules, certain capital gains reliefs were available for FHL properties. Those no longer apply in the same way after repeal.

Details are outlined in HMRC’s policy note on the removal of FHL-related reliefs:

Globally, the exit question always involves:

• Capital gains tax treatment
• Whether the asset is treated as residential or commercial
• Whether corporate structuring changes the outcome
• Timing of disposal relative to regulatory changes

For owners planning to sell a portfolio or refinance, tax should be part of the strategy early – not six weeks before completion.

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The bigger picture: tax is a reflection of structure

If there’s one takeaway from this furnished holiday lettings tax guide, it’s this: the tax regime may change, local regulations may tighten, night caps may appear, VAT thresholds may shift. What doesn’t change is the need for:

• Clean documentation
• Predictable occupancy
• Structured operations
• Clear segmentation between short-term and mid-term income

For single-unit owners, this is manageable. For multi-unit operators, this becomes a systems question. When tax, compliance, pricing, guest turnover, and reporting are handled as one coordinated workflow, the risk drops and the yield stabilises.

That’s the thinking behind full-service Airbnb management for multi-unit portfolios – making the operation compliant and scalable at the same time.

Make your short-term rental structure work for you

Frequently Asked Questions

Do furnished holiday letting tax advantages still exist in the UK?

No. The FHL regime has been repealed, and holiday letting is treated like other property income for income tax/corporation tax purposes.

Did VAT rules change because FHL ended?

No. VAT rules did not change because of the repeal, and holiday accommodation remains standard-rated where VAT applies.

What was the old “105 days let / 210 days available” rule?

It was part of the historic FHL qualification tests (letting condition and availability condition) used for prior tax years.

How are mortgage interest and finance costs treated now?

For individuals, relief is available at the basic rate (20%), similar to other landlords. Companies are not subject to the same restriction.

When do holidays fall under business rates instead of council tax?

In England, eligibility depends on being available for 140 nights and actually let for 70 nights (and Wales has higher thresholds). If you don’t meet the criteria, council tax generally applies instead.

What’s the VAT registration threshold in the UK?

It’s £90,000 of taxable turnover (rolling 12 months).

Is the London 90-night rule real?

Yes. In Greater London, short-term letting is generally restricted to 90 or fewer nights per calendar year unless permission is obtained.

Can mid-term rentals be part of a short-term rental strategy?

Yes, and often profitably, but they should be treated as a distinct product with its own operational and compliance considerations, not just “longer bookings”.