Furnished Holiday Let (FHL) Tax Regime: Abolition
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What’s Changed?
On 6 April 2025, the UK Government officially abolished the Furnished Holiday Let (FHL) tax regime, ending four decades of tailored tax treatment for self-catering businesses across the UK.
This marks a major shift in how holiday lets are taxed, with widespread implications for operators, investment, and local economies.
Licences are issued by local authorities, and each application must meet defined safety standards and documentation requirements. Licence fees and local policy approaches vary by council and by property type, making it essential for operators to review and follow their local authority’s specific guidance.
Operating a short-term let without a valid licence is a criminal offence. Enforcement action may be taken, and Police Scotland has the power to issue fines of up to £2,500 for unauthorised operation.
How Did We Get Here?
In November 2022, the Office of Tax Simplification (OTS) proposed significant changes to how self-catering accommodation is taxed including scrapping the separate FHL classification.
The Association of Scotland’s Self-Caterers (ASSC) and the Professional Association of Self-Caterers (PASC UK) responded with a joint submission, strongly advocating to retain a distinct FHL regime.
“Both the Scottish and UK governments should be laser focused on a pro-small business, pro-growth agenda… the abolition of the current tax regime runs contrary to that objective and will damage a key part of our tourist economy.”
– Fiona Campbell MBE, CEO, ASSC
What Was the FHL Regime?
The FHL regime recognised self-catering as a commercial activity, offering targeted tax benefits to qualifying properties that met strict letting conditions.
Key advantages included:
- Capital Allowances
Owners could claim tax relief on furniture, fittings, and equipment, not available to standard buy-to-let landlords.
- Pension-Qualifying Profits
FHL income counted as “relevant earnings,” allowing tax-relievable pension contributions.
- Capital Gains Tax (CGT) Reliefs, including:
- Business Asset Disposal Relief (BADR) – 10% CGT rate on qualifying gains
- Rollover Relief – Defer CGT by reinvesting proceeds into another business asset
- Holdover Relief – Defer CGT on gifts of the property
- Flexible Income Splitting
Profits could be split flexibly between spouses or civil partners for tax efficiency – unlike standard rental income.
Qualification Criteria:
To qualify, the property had to:
- Be located in the UK or EEA
- Be furnished and commercially let
- Meet occupancy rules:
- Available to let: 210 days per year
- Actually let to the public: 105 days per year
What Does Abolition Mean for You?
From April 2025, FHLs are now treated like standard residential property lets, meaning:
- No capital allowances
- No BADR or other business CGT reliefs
- No pension-qualifying profits
- No flexible income splitting
Many operators now face higher tax bills and reduced investment incentives.
Where Are We Now?
The ASSC continues to:
- Monitor the tax and financial impact on members
- Advocate for clarity, consistency, and fairness in future policy
- Highlight the vital economic role of the self-catering sector in Scotland
We remain deeply concerned that the loss of the FHL regime will force traditional operators out of business, affecting not just accommodation providers, but also the local economies, suppliers, and jobs they support.
Self-Catering Matters
Self-catering plays a vital role in Scotland’s tourism economy, particularly in rural and island communities. We are committed to ensuring that this important sector remains viable, valued, and visible in all future policy decisions.
The ASSC will continue to champion the voice of responsible operators, representing over 1,600 members who provide high-quality, authentic accommodation to visitors from around the world.
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