Last updated: 19 October 2026
Furnished holiday lettings (FHLs) used to enjoy several capital gains tax (CGT) reliefs that were normally only available to trading businesses. The special FHL tax regime was abolished from 6 April 2025 (1 April 2025 for companies), so holiday lets are now taxed in the same way as other residential lettings. This guide explains which CGT advantages have gone, the transitional rules that may still help, and how a holiday let is taxed when you sell it today.
What Has Changed for Furnished Holiday Lettings?
Before April 2025, a property that met the FHL occupancy tests (available for at least 210 days, actually let for at least 105 days, and not in longer lets totalling more than 155 days) was treated as a trade for CGT purposes. That gave access to business reliefs. From 6 April 2025 those rules no longer apply, and holiday lets form part of your ordinary UK or overseas property business. The occupancy tests, averaging elections and period of grace elections are no longer relevant for tax.
The Old CGT Advantages and Where They Stand Now
| Relief | Before 6 April 2025 | From 6 April 2025 |
|---|---|---|
| Business Asset Disposal Relief (BADR) | Available on disposal of the FHL business | Not available, except under the transitional rule below |
| Roll-over relief | Gains could be rolled into a replacement FHL or other business asset | Not available for new holiday lets; limited transitional relief only |
| Gift hold-over relief | Available on gifts of FHL property | Not available (unless the gift is into a relevant trust) |
| Substantial shareholding and other trade-based reliefs | Could apply | Not available |
Transitional Rules That May Still Help
Business Asset Disposal Relief After Cessation
If your FHL business genuinely ceased before 6 April 2025, BADR can still apply to a disposal of the property within three years of the date the business ceased, provided all the normal conditions were met. BADR gives a CGT rate of 18% for disposals on or after 6 April 2026 (14% in 2025/26), on lifetime qualifying gains of up to £1 million.
Roll-Over Relief
If you sold an FHL before 6 April 2025, the gain can still be rolled over into a qualifying replacement asset acquired within the normal time limits, but a holiday let bought on or after 6 April 2025 is not a qualifying asset because it is no longer treated as a trade. The replacement must be used in a genuine trade.
How a Holiday Let Is Taxed on Sale Today
A gain on selling a UK residential holiday let is taxed in the same way as any other residential property gain:
- CGT rates: 18% on gains within your unused basic rate band and 24% above it (24% for trustees).
- Annual exempt amount: £3,000 per person (£1,500 for most trusts).
- 60-day reporting: you must report the gain and pay the CGT through a UK property return within 60 days of completion.
- Private residence relief may apply for any period the property was genuinely your main home.
Example
Ben owns two holiday lets in Norfolk. In June 2026 he sells one for £400,000, realising a chargeable gain of £75,000. Before April 2025 he could have rolled the gain into a new holiday let. Now no roll-over relief is available, so after his £3,000 annual exempt amount he pays CGT of £17,280 (£72,000 × 24%) as a higher rate taxpayer, due within 60 days of completion. If he buys a replacement holiday let in Margate, its base cost is simply what he pays for it.
Other Tax Changes for Holiday Let Owners
- Mortgage interest: individuals now get only a 20% tax credit for finance costs, rather than a full deduction.
- Capital allowances: existing pools carry forward and writing-down allowances can continue, but new spending on furniture and equipment is relieved through the replacement of domestic items relief instead.
- Pensions: holiday let profits no longer count as relevant earnings for pension contributions.
- Splitting profits: jointly owned holiday lets follow the normal rules for jointly owned property, so profits are usually split 50:50 for spouses unless a declaration of actual shares is made.
- Losses: holiday let losses are now set against profits of your wider property business.
- Property income rates: from 6 April 2027, property income in England, Wales and Northern Ireland will be taxed at 22%, 42% and 47%.
Business rates and council tax rules for holiday lets have not changed with the abolition. See our guide on furnished holiday lettings and business rates, and the background in axe falls on tax benefits for furnished holiday lets.
Frequently Asked Questions
Can I still get Business Asset Disposal Relief on my holiday let?
Only if your FHL business ceased before 6 April 2025 and you dispose of the property within three years of cessation. Otherwise, the gain is taxed at the normal residential CGT rates of 18% or 24%.
Can I roll the gain on a holiday let into a new one?
No. A holiday let bought on or after 6 April 2025 is not a qualifying business asset for roll-over relief.
Do I still need to meet the 105-day letting test?
Not for tax purposes. The FHL occupancy tests no longer apply, although separate letting tests still matter for business rates.
When do I pay CGT after selling a holiday let?
Within 60 days of completion, through HMRC’s UK property reporting service. You also report the gain on your Self Assessment return.
Need Advice on Selling a Holiday Let?
Our accountants for furnished holiday lettings and property accountants can work out your CGT, check whether any transitional relief applies, and file your 60-day return. Contact us to book a call.
Partner Note: Finance Act 2025, Sch. 5; TCGA 1992, ss. 152, 165, 169H; HMRC CG73505.
