by Asim Abbas
11 November 2026 
Airbnb and holiday-let tax after the end of the FHL rules
Airbnb and holiday-let tax after the end of the FHL rules
For years, furnished holiday lets enjoyed tax advantages over ordinary rentals. That ended on 5 April 2025.
- The FHL regime was abolished from April 2025
- Holiday lets are now taxed like other rental income
- Mortgage interest gets only a 20% tax credit
- Rent a Room relief still covers up to £7,500 in your own home
If you let a cottage, a seaside flat or rooms through Airbnb or Booking.com, your 2025/26 return is the first full year under the new rules.
This guide explains what’s changed, how holiday-let income is now taxed and the ways you can still reduce your bill.
What changed in April 2025
| Area | Before April 2025 (FHL) | Now |
|---|---|---|
| Mortgage interest | Fully deductible | 20% tax credit only |
| Capital allowances | Available on furniture and fittings | No new claims; existing pools continue |
| Pension relevant earnings | Counted | Not counted |
| Capital Gains Tax reliefs | BADR and rollover relief possible | Generally not available |
| Profit splitting for couples | Flexible | Based on ownership |
How holiday-let income is taxed now
Holiday-let profit is added to your other UK property income and taxed at your normal rates. You can still deduct cleaning, linen, platform commission, utilities, council tax or business rates, insurance, repairs and replacement of furnishings like-for-like.
A higher rate taxpayer earns £28,000 from a cottage, with £9,000 of running costs and £7,000 of mortgage interest. Under FHL, tax was 40% of £12,000 = £4,800. Now it’s 40% of £19,000 = £7,600, less a £1,400 credit, so £6,200, an extra £1,400 a year.
Rental income tax calculator
See the tax on your holiday-let profit.
Letting rooms in your own home
If you let a furnished room in the home you live in, Rent a Room relief lets you earn up to £7,500 a year tax-free. This applies to Airbnb guests too. Above that, you can choose to pay tax on the excess or use normal expense rules.
Holiday lets in Wales
In Wales, a self-catering property must be available for 252 days and actually let for 182 days a year to pay business rates rather than council tax. Councils can also charge a premium on second homes. See our Wales tax pages.
Fixed-fee accountancy support
Transparent monthly packages for sole traders, landlords and limited companies. Fixed fees agreed upfront, VAT included.
Get a fixed-fee quoteCall 0161 531 4179How to reduce tax on a holiday let
- Claim every running cost, including platform fees and cleaning
- Review ownership between spouses with a Form 17 if shares are unequal
- Use existing capital allowance pools that continue after the change
- Consider whether a company structure suits a larger portfolio
- Plan ahead for the property income rates planned from April 2027
Our landlord tax returns service handles holiday lets, and our rental income calculator gives a quick estimate. HMRC’s guidance is on GOV.UK.
What should I do next?
Income and fees for 2025/26.
Cleaning, utilities, insurance and more.
For the 20% credit.
Our landlord service handles holiday lets.
Frequently Asked Questions
When did the FHL rules end?
On 5 April 2025 for Income Tax and 31 March 2025 for Corporation Tax. Holiday lets are now treated like other rental property.
Can I still claim capital allowances?
You can’t make new claims, but existing pools of expenditure can continue to be written down.
Is Airbnb income taxable?
Yes. Letting a whole property is rental income. Letting a room in your own home can be covered by Rent a Room relief up to £7,500.
Do I need to register for VAT?
Holiday accommodation is standard-rated, so if your takings pass £90,000 in a rolling 12 months you must register.
Can Wingate help with holiday lets?
Yes. We prepare holiday-let figures on your return and advise on ownership and planning.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Ali Imran
I’m Ali Imran, an accountant at Wingate Accountants. I help sole traders, landlords and directors get their returns filed early and accurately, without the last-minute panic.
