Last updated: 14 October 2026
What happens to your capital allowances pool after the furnished holiday lettings rules ended?
The furnished holiday lettings (FHL) regime was abolished from 6 April 2025 for income tax (1 April 2025 for corporation tax). If you had a capital allowances pool for furniture and equipment in your holiday let, you can keep claiming writing down allowances on the balance brought forward, at 14% (18% before April 2026) or 6% a year, until it’s used up. But you can’t add new spending to the pool. New furniture and equipment is instead covered by replacement of domestic items relief when you replace items.
Before and after April 2025
| Point | Before April 2025 (FHL) | From April 2025 |
| Capital allowances on new furniture | Yes | No |
| Existing pool balance | Writing down allowances | Continue writing down allowances |
| Replacement furniture | Capital allowances | Replacement of domestic items relief |
| Mortgage interest | Fully deductible | 20% tax credit only |
| Business Asset Disposal Relief | Available | Not available (with limited transitional rules) |
| Profits as pension earnings | Yes | No |
How the pool continues
- The balance brought forward on 6 April 2025 stays in the pool
- You claim 18% a year on the main pool, or 6% on the special rate pool, against your property income
- When you sell an asset, deduct the sale value from the pool
- If the pool falls to £1,000 or less, you can write off the whole balance in one go
Example
Rachel converted a barn into two holiday cottages in 2021, claiming capital allowances on fittings. Her main pool balance on 6 April 2025 was £24,000. In 2025/26 she claims 18% (£4,320), and in 2026/27 she claims 14% of the remaining £19,680 (£2,755), as the main rate fell from 6 April 2026. She buys a new sofa in 2026 to replace an old one: she claims the cost under replacement of domestic items relief, not capital allowances.
Integral features
Items like heating systems and electrical installations that were in the special rate pool continue at 6% a year. New integral features after April 2025 are generally treated as part of the property, and replacements are repairs if like-for-like.
Business Asset Disposal Relief
BADR on selling a former FHL is only available under transitional rules, for example where the business ceased before April 2025 and the sale is within 3 years.
Ending the letting business
If you stop letting the property, the pool ends and a balancing allowance or charge arises, based on the market value of the assets.
Common mistakes
- Adding new furniture bought after April 2025 to the pool
- Stopping claims on the existing pool, and losing years of allowances
- Claiming replacement relief on items bought for the first time
- Forgetting to bring in sale proceeds when old items are sold
Keep a copy of the pool calculation from your 2024/25 return, as it is the starting point for every later claim.
Frequently asked questions
Can I add a new hot tub to the pool?
No; new assets after April 2025 can’t be added.
Does replacement relief cover the first set of furniture?
No, only replacements.
Do holiday lets still need to meet day tests?
No, the FHL tests no longer matter for income tax.
Is a holiday let now a business for business rates?
That is a separate test, still based on availability and letting days.
Related: what happened to the FHL rules, CGT rollover from a holiday let and what landlords can claim.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with holiday let tax after FHL abolition. See our landlord accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
