Holiday let tax allowances & expenses

In this guide

We’ve looked at the advantages and disadvantages of holiday lets, now let’s take a more detailed look at the allowances and expenses you can offset against your FHL profits in the run up to April 2025.

The Furnished Holiday Tax regime will end in April 2025

As announced in the March 2024 Budget, the government will abolish the Furnished Holiday Lettings tax regime. Read our blog for the latest updates

Capital allowances

As mentioned earlier, furnished holiday lets are a trading business and taxed as such. The good news is that, up until April 2025, there are tax allowances available for furnished holiday lets that are not available to buy-to-lets - these are called capital allowances.

What is it:

Capital allowances is tax relief on the reduction in value of “plant and machinery” assets. In the context of a holiday let, this is the furniture, fixtures and fittings you’re putting into your business.
Capital allowances allow the business to write off the cost of the assets over a number of years. This is commonly done by offsetting a percentage against the taxable profit, and in some circumstances could mean tax-free profits for a number of years.
Alternatively, you may be able to offset the full amount of certain ‘plant & machinery’ assets in your first year - this is known as an Annual Investment Allowance (AIA).
Capital allowances cannot be claimed for buy-to-lets, as BTL is classed as an investment, rather than a trading business for tax purposes.

When to claim:

Capital allowances can be claimed on a new build or conversion of a qualifying FHL property at the end of the tax year on your self-assessment tax return or company accounts.
They can also be claimed on the purchase of an existing FHL property which has not previously claimed capital allowances (or not claimed them fully) through a section 198 election during the purchase process.

Examples of holiday let capital allowances

Loose items (that could be moved to another property)	Fixed items (cannot be moved)
Furniture - sofa, table & chairs, beds, wardrobes/drawers	Sanitary ware & plumbing
Furnishings - curtains, bedding, cushions	Kitchen units
White goods - freestanding fridge & freezer	Electrics
Appliances - microwave, kettle, toaster, television	Heating
	Carpets
	Property repair and replacement - such as kitchen & bathroom fittings, windows, doors and boilers

View HMRC’s capital allowances helpsheet (HS252)

Allowable holiday let expenses

In addition to capital allowances, there are also the usual allowable expenses that can be offset against profits to reduce the amount of tax due.

Capital expenditure

What is it:

A capital expenditure is a cost related to the property in its entirety and includes expenses designed to add value, such as adding an extension, en-suite, conservatory or a log burner.

When to claim:

Capital expenditures can be claimed when selling the property to offset capital gains tax.

Examples of holiday let capital expenditure

Capital expenditure	Description
Property purchasing expenditures	Including solicitors costs and survey costs from when the property was initially purchased.
Stamp Duty Land Tax	From when the property was initially purchased.
Property enhancement	Value added to the property, such as building an extension, adding an en-suite or reconfiguring the layout. For FHLs, this could also include luxury improvements such as a log burner or hot tub.
Estate agent fees	From selling the property.

Other holiday let expenditure

You can continue to claim the usual day-to-day costs associated with managing and running the FHL as you do with normal investment properties.

What is it:

Revenue expenditure is the costs incurred for the day-to-day running of the furnished holiday let business. They can be deducted from the gross profits to reduce your taxable profit.

When to claim:

At the end of the tax year on your self-assessment tax return or company accounts.

Examples of holiday let other expenditure

Expense	Description
Mortgage interest repayments	The full mortgage interest can be claimed for furnished holiday lets.
Maintenance	Costs of maintaining the holiday let, such as cleaning and gardening.
Holiday let business management costs	Including holiday let insurance, accountancy fees, advertising, online platform fees, membership charges of landlord/property associations, and stationery.
Travel, hotel accommodation, food & drink	Whilst away on business/visiting properties. Mileage is 45p per mile for the first 10,000 miles per tax year and 25p per mile for all miles thereafter in a car. These can only be claimed when visiting the holiday let on business, not for private travel.
Legal fees	Including those associated with mortgage/re-mortgage arrangement costs. Also includes extending leases of up to 50 years, preparing contracts and preparing deeds of trust.
Computer & mobile phone costs	If an expense, such as a mobile phone, laptop or tablet, is not used 100% of the time for running the property business, a proportion of the cost can be claimed.
Utility & Council tax costs	Utilities (water, electric and gas) and council tax can be claimed if the property is empty.

Pro Guide:

Furnished holiday let tax

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