Furnished Holiday Lets – Still a Good Idea?
Furnished Holiday Lets (FHLs) used to be the tax-savvy landlord’s dream — a nice income stream, tax breaks galore, and the chance to pass on your investment tax-free. But times, as they say, are changing.
With platforms like Airbnb coming under pressure in popular tourist hotspots (thanks to a mix of housing shortages, local council crackdowns, and yes, probably a few annoyed hotel chains), FHLs have been under the spotlight. And to add to the fun, the government has tightened the rules on what counts as an FHL – and scrapped a few of the tasty tax benefits too.
So, what's changed?
Let’s talk tax relief.
Previously, one of the perks of FHLs was the generous treatment of expenses. If, for example, your boiler packed in and you replaced it with a like-for-like model, the full cost could be claimed as a repair.
But say you fancied doing your bit for the planet and decided to install a heat pump instead — that’s classed as an improvement, not a repair. Which means it’s not deductible in the same way, and you won’t see an immediate tax benefit via your Self Assessment return.
The big blow? Business Property Relief.
One of the biggest tax benefits of running an FHL was that it could qualify as a trading business, meaning your property might be eligible for Business Property Relief (BPR). In short: you could potentially pass it down to your kids without Inheritance Tax getting its claws in.
But Chancellor Rachel Reeves put the brakes on that in the 2024 Spring Budget. The government is now phasing out BPR for furnished holiday lets from April 2025, removing one of the main incentives for running this type of business.
So… is it still worth it?
Well, that depends.
The right holiday let in the right area can still generate a healthy income — even after tax. But it’s no longer the passive, hands-off investment some people imagine.
You’ve got guest enquiries to handle, bookings to manage, changeovers to organise, and cleaners to chase (good luck with that). Cleaners, by the way, are the Achilles’ heel of many FHL businesses — finding a reliable one is like trying to find a unicorn that also irons.
If you’re local and don’t mind rolling up your sleeves to do the changeovers yourself, you could be sitting on a tidy little goldmine. But if you’re hoping for a quiet retirement and a hands-free income, you might want to rethink or consider outsourcing to a management company (which, of course, eats into your profits).
In summary…
Furnished holiday lets aren’t the tax-efficient darlings they once were. But with the right property, in the right location — and a willingness to muck in — they can still be profitable.
Just don’t go into it wearing rose-tinted specs. It’s a business, not a holiday.
We’re here to help. Whether you're considering your first furnished holiday let or already managing a portfolio, our team can guide you through the financial planning, tax implications, and compliance requirements—so you can make smart, informed decisions.
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