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Furnished holiday lettings abolished: what changed for lodge owners

The furnished holiday lettings regime ended on 6 April 2025 under Schedule 5 of the Finance Act 2025. Four tax advantages went with it, one thing owners assume changed did not, and most of it matters less on a static caravan than on a cottage.

Published 2026-08-11 · updated 2026-08-11 · 10 min read · all figures sourced below

The furnished holiday lettings tax regime was abolished by section 25 and Schedule 5 of the Finance Act 2025. It stopped applying from 6 April 2025 for income tax and capital gains tax, and from 1 April 2025 for corporation tax.

If you sublet your lodge or static caravan, four things changed. Loan interest is no longer a deduction. Capital allowances on new spending stopped. Capital gains reliefs meant for trading businesses were withdrawn. Letting profit no longer counts as earnings for pension relief. One thing did not change, and it is the thing owners most often think did: the night counts that decide business rates.

What did the Finance Act 2025 actually abolish?

Section 25 of the Finance Act 2025 is one sentence: "Schedule 5 contains provision abolishing the special rules relating to the commercial letting of furnished holiday accommodation."

Schedule 5 does the work. Paragraph 12 sets the income tax changes to have effect "in relation to the tax year 2025-26 and subsequent tax years", corporation tax for accounting periods beginning on or after 1 April 2025, and capital allowances for periods of account beginning on or after 6 April 2025 for income tax. Paragraph 13 applies the chargeable gains changes to disposals made on or after the commencement date.

Before that, a property had to pass three tests to qualify. HMRC's helpsheet HS253 gives them: available for letting as furnished holiday accommodation for at least 210 days in the year, actually let commercially for at least 105 days, and lettings of more than 31 continuous days not exceeding 155 days in total. Those tests last decided anything for the 2024-25 tax year.

From 2025-26 they decide nothing for income tax. HMRC's Property Income Manual at PIM4165 says the rules cease to apply and the letting becomes part of an ordinary UK property business. HMRC's policy paper says businesses "will no longer calculate profits for furnished holiday lettings separately".

Do the 105 nights and 210 days tests still matter for anything?

Not for income tax, and they were never the business rates test in the first place. This is the single most common confusion I see, and it predates the abolition.

Business rates run on a different set of numbers, published by GOV.UK. In England the property must have been available to let commercially for short periods for at least 140 nights in the last 12 months and actually let for at least 70 nights. In Wales the thresholds are 252 nights available and 182 let, or an average of 182 a year over the last 24 or 36 months. From 1 April 2026, Wales allows up to 14 donated charity nights a year to count towards both.

Nothing in Schedule 5 touches those. How rating works on a licensed park is set out in do you pay council tax on a static caravan or holiday lodge?.

What happened to loan interest relief?

Interest on a loan used to buy the lodge is no longer deductible from letting profit. It now attracts a tax reduction at 20% instead.

Section 272A of the Income Tax (Trading and Other Income) Act 2005 restricts deductions for the costs of a dwelling-related loan. It was phased in from 2017-18 and reached no deduction at all from 2020-21. Furnished holiday lettings were outside it until April 2025. They are inside it now.

In its place you get the basic rate tax reduction. HMRC's guidance for residential landlords gives the mechanics: the reduction is 20% of the lowest of three amounts, the finance costs not deducted in the year plus any brought forward, the property business profits for the year after brought forward losses, and adjusted total income above your personal allowance excluding savings and dividend income. Where the reduction is capped by profits or adjusted total income, the unused finance costs carry forward to later years.

Take £4,000 of loan interest. Under the old rules it came off the profit before tax, so it was worth relief at your marginal rate. Now the deduction is nil and the reduction is £4,000 at 20%, or £800, assuming profits and adjusted total income both clear £4,000. A basic rate taxpayer is roughly where they were. Anyone paying above 20% loses the difference. What that does to a financed purchase is in holiday lodge finance explained.

What happened to capital allowances?

New expenditure gets nothing. Expenditure already in a pool by 5 April 2025 carries on.

PIM4180 states the old position: furnished holiday lettings businesses "were entitled to capital allowances on plant and machinery such as the furniture, white goods, etc. within the property whereas non-FHL property businesses did not and still do not qualify for capital allowances on these items". That special treatment has gone.

The transition is gentler than it sounds. HMRC's clarification paper confirms that where qualifying expenditure was pooled by 5 April 2025, "Writing Down Allowances, balancing allowances and charges can continue to be claimed after April 2025 on that pooled expenditure until it is used up or a small pool claim is made". The Capital Allowances Manual at CA20025 confirms there is no deemed disposal: the person "is not treated as having disposed of plant or machinery by reason of the permanent discontinuance of the furnished holiday lettings business", and the unrelieved expenditure transfers to the pool for the corresponding property activity. Short-life asset elections carry across too.

For replacements from 2025-26 you fall back on replacement domestic items relief under section 311A ITTOIA 2005. It is narrower than capital allowances. It covers replacing an item, not buying it the first time, and only where no Capital Allowances Act allowance applies. A new sofa replacing an old sofa qualifies. Kitting out a lodge from empty does not.

There is one wrinkle specific to caravans that HMRC has not tidied up. The Capital Allowances Manual at CA22100 still says HMRC will "Accept that a caravan, which is provided mainly for holiday lettings on a holiday caravan site, is plant whether it is moved or not". Section 35 of the Capital Allowances Act 2001 says expenditure by a UK property business "is not qualifying expenditure if it is incurred in providing plant or machinery for use in a dwelling-house", and the Finance Act 2025 amended that section with effect from April 2025. HMRC's published pages do not say how those two rules meet for a static caravan let on a licensed park after abolition. If you have claimed allowances on the caravan itself rather than on its contents, that is a question for your accountant. I am not going to guess at it here, and neither should anyone selling you a lodge.

What happened to the capital gains reliefs?

They were withdrawn for disposals on or after 6 April 2025, with an anti-forestalling rule reaching back to 6 March 2024.

HMRC's Capital Gains Manual at CG73505 lists what went: rollover relief where the replacement asset is acquired on or after that date, relief for loans to traders, and business asset disposal relief on a disposal of the whole or part of a furnished holiday lettings business. Gift holdover relief falls into the same anti-forestalling net.

Schedule 5 paragraph 14 sets out the anti-forestalling rule. It bites where an asset is disposed of under an unconditional contract made between 6 March 2024 and the day before commencement, with the conveyance falling on or after commencement. The abolition still applies unless no purpose of the contract was to avoid it, and either it was wholly for commercial reasons or the parties are unconnected. CG73505 says a statement to that effect is required in the claim.

HMRC's clarification paper is blunt about the only route through: "To benefit from capital gains reliefs beyond April 2025, the business has to cease before 1 April 2025 for Corporation Tax or before 6 April 2025 for Income Tax and Capital Gains Tax purposes." That window shut sixteen months ago.

Even where business asset disposal relief survives, it is worth less. GOV.UK publishes the rates: 10% on disposals on or before 5 April 2025, 14% between 6 April 2025 and 5 April 2026, and 18% from 6 April 2026.

Does any of this matter on a static caravan?

Much less than it matters on a cottage, because the caravan is a depreciating chattel rather than land.

HMRC treats a caravan provided mainly for holiday lettings on a holiday caravan site as plant, per CA22100. Section 44 of the Taxation of Chargeable Gains Act 1992 says plant and machinery "shall in every case be regarded as having a predictable life of less than 50 years", which makes it a wasting asset. Section 45(1) then provides that "no chargeable gain shall accrue on the disposal of" a wasting asset that is tangible movable property. Section 45(2) restricts that exemption where capital allowances have been or could have been claimed, so whether it applies to your unit depends on what was claimed and when.

The blunter point is arithmetic. Static caravans and lodges lose value fast, as the resale evidence in how much does a static caravan lose in value each year? shows. Reliefs that shelter a gain are worth nothing when there is no gain. If you own a holiday cottage, the withdrawal of rollover and business asset disposal relief is the expensive part of this reform. If you own a caravan on a pitch licence, the interest restriction and the pension change will cost you more.

Does it change anything if you own the lodge jointly with your spouse?

Yes, and it is easy to miss because it happens silently on the tax return.

Section 836 of the Income Tax Act 2007 treats a married couple or civil partners who live together as beneficially entitled to income from jointly held property "in equal shares". Exception D to that rule covered furnished holiday lettings income, and Schedule 5 omitted it for the tax year 2025-26 onwards.

So the 50/50 default now applies to lodge letting income. PIM4190 sets out the escape route: the split follows actual entitlement only where the beneficial interests are unequal and the couple have told HMRC on Form 17, which must reach HMRC within 60 days of the declaration. If the two of you pay tax at different rates and the ownership is genuinely unequal, that form is the difference.

What happened to pension relief on letting profit?

Letting profit stopped counting as relevant UK earnings from 2025-26, so it no longer supports pension contributions.

Section 189 of the Finance Act 2004 defines relevant UK earnings. Paragraphs (ba) and (bb) of section 189(2), which covered income from furnished holiday lettings, were omitted by the Finance Act 2025 for the tax year 2025-26 and subsequent tax years.

GOV.UK's guidance is that you get tax relief on private pension contributions "worth up to 100% of your annual earnings", and that with no earnings you can still get relief at source on up to £2,880 a year. An owner whose only income was a furnished holiday letting could previously contribute against that profit. From 2025-26 they cannot.

What to check now

Ask your accountant to confirm the capital allowances pool was carried across rather than closed. CA20025 says there is no deemed disposal, but a pool closed in error costs real money in lost writing down allowances.

If the lodge is in unequal beneficial shares and you have not filed a Form 17, work out whether the 50/50 default is costing you, and remember the 60 day deadline runs from the declaration.

Re-run your letting figures with interest relieved at 20% rather than deducted, using the ownership cost calculator and the scheme rates in renting out your holiday lodge. Park letting schemes were already thin after commission. The interest change makes a financed lodge thinner.

And ignore anyone in a sales office who still quotes the 105 night test at you as a tax benefit. It has decided nothing since April 2025.

Sources