Furnished holiday let tax calculator, 2026/27

What changed for furnished holiday lets

Until 5 April 2025, a property qualifying as a furnished holiday let sat outside the normal property income rules in several valuable ways: mortgage interest was fully deductible against profit, capital allowances could be claimed on furniture and equipment, profits counted as relevant earnings for pension contributions, and certain capital gains reliefs (including rollover relief and Business Asset Disposal Relief) were available on sale. From 6 April 2025, all of that was withdrawn, and FHL income is taxed exactly like any other UK residential letting.

For owners who had built a portfolio around these advantages, particularly the full interest deduction and the capital gains reliefs, this is a material shift in the economics of holding a holiday let through personal ownership, and many are reassessing whether a limited company structure now makes more sense.

How this is calculated

This calculator strips mortgage interest out of the profit calculation entirely, taxes the remaining property profit (gross rent less allowable running costs such as cleaning, insurance, agency fees and repairs) at your marginal income tax rate, then applies a 20% tax credit against the mortgage interest actually paid, matching the same Section 24-style restriction that has applied to standard residential lets since 2020.

Qualifying tests that used to define an FHL (letting for at least 105 days a year, availability for 210 days, and not let to the same person for more than 31 continuous days for over 155 days a year) no longer carry the tax advantages they used to, though they may still be relevant for VAT and business rates purposes.

What to reconsider now

Pension contributions can no longer be based on FHL profits counting as relevant UK earnings, which may reduce how much some owners can pay into a pension tax-efficiently. Anyone who was relying on Business Asset Disposal Relief or rollover relief on an eventual sale should get updated capital gains tax advice, since standard residential property CGT rates and reliefs now apply instead.

Some owners are looking again at incorporating the letting business into a limited company to restore full interest deductibility against corporation tax, but this needs weighing against the cost of transferring the property, any stamp duty land tax, and different mortgage terms available to companies.

Is the furnished holiday let regime still available in 2026/27?

No. It was abolished from 6 April 2025. FHL properties are now taxed under the same rules as any other UK residential letting, including the 20% mortgage interest tax credit restriction and the loss of capital allowances on furniture.

Can I still claim capital allowances on furniture in my holiday let?

No, not under the capital allowances regime that FHLs previously used. Replacement domestic items relief, available to ordinary landlords, can still be claimed when you replace (not initially provide) furniture, appliances and furnishings, on a like-for-like basis.

Does my holiday let still need to meet the letting-day tests?

The occupancy tests are no longer relevant for income tax and capital gains tax purposes since FHL tax treatment ended, but they can still matter for business rates eligibility (in England, properties available for 140 days and let for 70 are assessed for business rates rather than council tax).

Should I move my holiday let into a limited company?

It depends on your borrowing, your marginal tax rate and your exit plans; a company restores full interest deductibility but introduces corporation tax, potential double taxation on extracting profit, and transfer costs including stamp duty land tax and possible capital gains tax on the transfer.