The End of the UK’s Furnished Holiday Let Regime: What It Means for Holiday Let Owners
- Emma Oglethorpe
- Feb 12
- 3 min read
The recent UK budget announcement has sent ripples through the holiday letting industry, with the government’s decision to abolish the Furnished Holiday Let (FHL) tax regime from April 2025. If you own a holiday let in Brighton or Sussex, you may be wondering how this will impact your business and whether it’s time to reconsider your strategy. At Hedge Brown Property Management, we understand that change can feel unsettling, but we’re here to break it down and help you navigate this transition smoothly.
What’s Changing?
Under the current FHL tax regime, holiday lets that meet specific criteria benefit from a range of advantages, including full mortgage interest relief, capital allowances, and business rates instead of council tax. However, from April 2025, holiday lets will be taxed in line with standard buy-to-let properties, meaning:
Mortgage interest relief will be restricted to a 20% basic rate tax credit (instead of full deduction from rental profits).
Capital allowances (which allow you to claim tax relief on furnishing and equipment) may no longer be available.
Losses from holiday lets will no longer be offset against other income.
For landlords who operate their holiday lets through a limited company, these changes will not have the same impact.
Who Will Be Affected?
The degree to which these changes impact you depends on your income and tax band. Here are a couple of examples:
Case 1: Lower-rate taxpayer – Emily earns £35,000 from her main job and £10,000 profit from her holiday let. As her total income remains below £50,270, she will still receive mortgage interest relief at the same 20% rate and see no tax increase.
Case 2: Higher-rate taxpayer – James earns £80,000 from his job and £15,000 profit from his holiday let. Currently, he deducts £3,000 in mortgage interest from his rental profits, saving £1,200 in tax (40% relief). From April 2025, he will receive only 20% relief, reducing his tax saving to £600—meaning he pays £600 more in tax.
For high earners with significant mortgage interest expenses, this shift may lead to increased tax bills. However, for those who fall within the basic tax bracket, the impact will be negligible.
What Can Holiday Let Owners Do?
With these changes on the horizon, it’s important to assess your options and plan accordingly. Here are some key steps to consider:
Review Your Financial Position – If you are a higher-rate taxpayer, work with a financial advisor to evaluate whether restructuring your property ownership (e.g., transferring to a limited company) is beneficial.
Maximise Earnings to Offset Tax Costs – Higher tax bills can often be outweighed by strategic pricing and improved occupancy rates. Our expertise in managing Brighton and Sussex holiday lets ensures our clients achieve the best possible returns.
Explore Capital Allowances While You Still Can – There is still time to take advantage of capital allowances before the FHL regime ends. If you’ve recently invested in furnishings or renovations, make sure you claim tax relief while you’re eligible.
Consider Long-Term Rental Alternatives – If your holiday let’s profitability is significantly impacted, switching to a long-term tenancy could be an option. However, with the strong demand for short-term lets in Brighton, this is unlikely to be the best financial move.
What This Means for the Holiday Let Market
One potential outcome of these changes is a reduction in the number of holiday lets on the market, as some owners may decide to exit. However, this could be good news for those who remain in the business, less competition can lead to higher occupancy rates and stronger pricing power. At Hedge Brown Property Management, we are already preparing strategies to help our clients capitalise on this shift and ensure their properties continue to perform well.
Navigating the Future with Hedge Brown Property Management
While tax changes can feel daunting, they don’t have to spell disaster. Our tailored approach ensures that each property we manage is positioned for success, even in an evolving landscape. Whether it’s adjusting pricing strategies, optimising occupancy, or helping you explore your tax options, we are here to support you through the transition.
If you own a holiday let in Brighton or Sussex and are wondering what steps to take next, let’s have a chat. Together, we’ll ensure your property remains a thriving investment in the years ahead.
Hedge Brown Property Management – Your Local, Hands-On Holiday Let Experts
Have questions about how the changes will affect you? Get in touch today to discuss your options and make sure your holiday let continues to perform at its best.
07727980261
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