Quick answer: The furnished holiday lettings (FHL) tax regime was abolished from 6 April 2025. FHL income is now treated the same as any other UK property income, including for MTD purposes: it’s combined with your other property income when testing the qualifying income threshold, and finance costs are now restricted to the basic-rate credit like any other let property.
If you own a furnished holiday let, the tax landscape around it changed significantly before MTD for Income Tax even arrived, and it’s worth being clear on both changes together rather than treating them separately.
What changed with the FHL regime
From 6 April 2025, the special tax treatment that furnished holiday lets previously benefited from was withdrawn. FHL income and gains now form part of your ordinary UK (or overseas) property business, on the same footing as any other rental property. That removed four specific advantages FHL owners previously had: full finance cost deduction (now restricted to the basic-rate credit, like other residential lets), capital allowances on new furniture and equipment (now replaced by replacement of domestic items relief), access to certain capital gains reliefs on disposal, and the ability to count FHL profits as relevant earnings for pension purposes.
What this means for MTD
Because FHL income is no longer a separate category, it’s simply combined with the rest of your UK property income when calculating your qualifying income for MTD for Income Tax. There’s no separate FHL threshold or separate reporting stream; a quarterly update for a landlord with a former FHL property looks the same as one for any other landlord’s property business.
What still applies
You can still claim ordinary allowable expenses against FHL income, the same as any rental property; what’s gone is the additional, more generous treatment FHLs specifically used to receive. See our guide to landlord allowable expenses for what’s deductible under the standard rules that now apply.
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