The once generous Furnished Holiday Let (FHL) tax scheme may now have been abolished, but there are still potentially thousands of Capital Allowance claims out there that precede the 31 March cut-off date.
The 2024 Autumn Budget brought an end to the FHL regime from April this year, with owners now facing a period of uncertainty.
Could FHL owners still have a claim?
If your clients didn’t claim Capital Allowances before the 31 March deadline, it’s not too late, but timing is crucial.
Owners of FHL may still be able to:
Backdate a claim under the right circumstances
Claim in a 2025/26 return before the regime is potentially withdrawn
Review eligibility based on qualifying fixtures and fittings, including kitchens, bathrooms, heating systems and furnishings
We’re still speaking to many holiday let owners and their accountants who missed the deadline but still want to understand what’s possible.
What is eligible for a Capital Allowance claim?
As accountants working with clients in the property sector, particularly those with Furnished Holiday Lets (FHLs), it's essential to familiarise yourself with the eligibility criteria for Capital Allowances, even though the scheme has ended.
These allowances can still offer significant tax savings for periods before 31 March this year, but HMRC imposes strict requirements to ensure that properties qualifying as FHLs are genuinely operated as commercial holiday businesses.
To help clients access this valuable relief, here are the key compliance points to consider:
The property must be adequately furnished
For a property to qualify, it must be furnished to a standard that supports a comfortable, self-catering stay. HMRC does not define a specific inventory, but the furnishings should clearly support its use as short-term holiday accommodation. Advising clients to work with an experienced holiday letting agency can ensure the property is appropriately equipped and guest ready.
There must be a commercial motive
HMRC requires that the property be let on a commercial basis to make a profit. While profitability is not mandatory in the early years, clients must be able to demonstrate genuine commercial intent.
A formal business plan or evidence of listing the property through established platforms (such as Sykes or Airbnb) can support this.
Minimum occupancy rules must be met
During the first 12 months of letting (often referred to as the ‘probationary period’), a property must meet all the following criteria to qualify as an FHL:
Available to let for at least 210 days in the year
Let commercially for at least 105 days
Not occupied by the same person or group for more than 155 days in total under long-term (31+ days) arrangements
Importantly, any personal use by the owner or their friends and family, particularly at discounted rates, does not count towards the commercial letting threshold.
If your client owns multiple qualifying FHLs, the occupancy thresholds may be averaged across their portfolio, which can be helpful in marginal cases. Helping clients understand and meet these conditions is key to unlocking Capital Allowance claims and maximising tax efficiency.
By reviewing their letting strategy, use of agents, and compliance with occupancy rules, you can help ensure they benefit from the relief while remaining within HMRC’s framework.
If you have clients operating FHLs and would like to explore their eligibility for Capital Allowances that are available or need support on occupancy averaging or HMRC reporting, our specialist tax team is here to help.
What should FHL owners do next?
The FHL scheme may have ended, but there are still steps that should be taken by you and your clients:
1. Check if you still qualify for a claim: Your clients may still be eligible for a Capital Allowance claim, especially if they’ve never claimed before or recently refurbished a property.
2. Understand what the proposed changes mean for you: The removal of the FHL regime could affect Capital Allowance eligibility, Income Tax treatment, and the ability to offset profits against other income. Explore this with your client before you make a claim.
3. Plan for 2025/26: With the tax year just beginning, now is the ideal time to assess your property’s status, gather necessary documentation, and ensure your holiday let continues to meet HMRC’s qualifying criteria.
