Does short letting still make financial sense after the furnished holiday let tax changes?

For years, the furnished holiday lettings regime gave qualifying short lets a different tax treatment from standard residential rentals. That regime ended in April 2025. For some owners, the numbers have changed materially. For others, a well-run short let can still be the right commercial choice.

The useful question is no longer whether a property once qualified for FHL treatment. It is whether the income, costs, risk and effort now stack up for your particular home.

What changed with the furnished holiday let tax rules?

For individuals, the FHL rules ceased to apply from 6 April 2025 for Income Tax and Capital Gains Tax. For companies, the change applied from 1 April 2025. Income from short-term holiday accommodation now sits within the usual property-income rules rather than the former separate FHL regime.

HMRC says the change removed four main advantages: the previous treatment of finance costs, capital allowances for new expenditure, certain capital gains reliefs and the ability to count FHL income as relevant earnings for pension relief. General revenue expenses such as utilities, repairs, cleaning products and toiletries can still be claimed where they meet the normal rules.

This is a significant change, especially for highly geared individual owners. It is not, however, a simple instruction to abandon short letting. Tax is one part of a wider commercial model.

Does short letting still make financial sense?

It can, but only after an honest comparison. A short let should be assessed against the realistic alternative for the property, whether that is a conventional tenancy, a different short-stay strategy or holding it for personal use.

Start with net income rather than an attractive nightly rate. A premium rate loses meaning if it is achieved only on a small number of nights, or if high operating costs absorb the difference.

Build the comparison from the bottom up

Use your own records where possible. If the property is new to short letting, make conservative assumptions and test more than one occupancy scenario.

• Estimate achievable booked nights and the average rate by season, not one annual average
• Deduct platform fees, management, cleaning, linen, utilities, insurance, maintenance and guest supplies
• Allow for void periods, last-minute gaps and the cost of keeping the home guest-ready
• Compare the result with likely long-let income after its own costs, restrictions and periods without rent
• Ask your tax adviser to model the ownership structure, finance costs and reliefs that apply to you

That final point matters. The repeal affects individuals and companies differently, and the right answer depends on facts that a general article cannot know.

Look beyond the tax position

Short letting is an operating business in all but name. The guest experience, response speed, availability, photography and revenue management determine whether the higher gross-income potential is actually realised.

A distinctive city apartment near transport, venues or business districts may have a strong case if it can command a premium rate and is managed consistently. A property in a market with limited demand outside peak dates may not. The same tax change can therefore lead two sensible owners to opposite decisions.

Check the rules that apply to the property

Tax treatment is not the only compliance issue. Planning restrictions, lease terms, mortgage conditions, insurance and local licensing or registration requirements may all shape what is possible. Government guidance for self-catering holiday homes also notes that the FHL tax regime has ended while other obligations, including safety requirements, continue.

Make those checks before modelling income. A projected return is not useful if the intended use is restricted by the building, lender, insurer or local authority.

A clearer way to decide

The end of the FHL regime removed a valuable advantage. It did not remove guest demand, the importance of location or the value of a professionally operated stay.

For the right property, short letting may still deliver stronger net income, greater flexibility or a better fit with the owner's plans. The decision now needs a more rigorous model: one built on realistic revenue, full operating costs, current rules and good professional advice.

This article is general information only, not tax, legal or financial advice. Take advice from a suitably qualified professional before making a decision about your property.

Sources: HMRC's FHL abolition policy paper and HMRC's clarification guidance, accessed 9 September 2026.