06 May 2026
It has now been a year since HMRC abolished the Furnished Holiday Let (FHL) tax regime in April 2025. This significant change removed the preferential tax treatment previously available to short-term holiday lets, bringing them in line with standard property businesses.
Key Impacts on Landlords
The abolition of FHL rules has affected landlords in several important ways:
- Higher tax bills: Many landlords have experienced increased income tax and capital gains tax liabilities, as the FHL-specific reliefs and allowances were removed.
- Changes to mortgage interest and capital allowances: Finance costs are now restricted to the basic rate for income tax purposes, and new expenditure on furnishings no longer qualifies for capital allowances. Replacement of domestic items relief remains.
- Loss of certain reliefs: Reliefs such as roll-over relief, business asset disposal relief, and gift relief associated with FHLs were largely abolished.
- Pension contributions: FHL income no longer counts as relevant UK earnings for calculating maximum pension contributions.
- Local council compliance: Pembrokeshire County Council continue to enforce rules for licensing and business rates, which can sometimes create differences from HMRC treatment.
Business Rates In Pembrokeshire for FHLs
Even though HMRC no longer treats FHLs as businesses for tax purposes, local councils still regulate short-term and holiday lets and properties may still be liable for business rates instead of council tax. A self-catering property is classified as non-domestic and liable for business rates if the Valuation Office Agency is satisfied that:
- It will be available for letting commercially for short periods totalling 252 days or more in the following 12 months.
- The ratepayer’s interest in the property enables them to let it for such periods.
- In the 12 months prior to assessment, it has been available for letting commercially for short periods totalling 252 days or more.
- The property has actually been commercially let for at least 182 days during that period.
This means landlords must now comply with both HMRC tax rules and local council requirements, which do not always align.
How Landlords Are Adapting
Over the past year, landlords have been taking practical steps to adjust to the post-FHL landscape:
- Reviewing Portfolios: Carefully evaluating whether short-term let’s remain financially viable under standard property tax rules.
- Seeking Professional Advice: Working with accountants and tax advisers to optimise tax positions and plan future investments.
- Adjusting Investment Strategies: Diversifying into long-term residential lettings or corporate structures to manage tax efficiently.
Lisa Davies
