UK Holiday Let Owners Report Profit Gains After Tax Overhaul

Just under half of UK holiday let owners say their profits have risen since April, when the government scrapped the Furnished Holiday Lettings tax regime that had given short-term rental owners in England, Scotland and Wales better deductions than ordinary buy-to-let landlords, according to a new survey of operators. That is not the outcome most in the sector expected when the change was first announced.

What the FHL regime used to give owners

Furnished Holiday Lettings status let qualifying owners deduct mortgage interest in full against rental income, claim capital allowances on furniture and equipment, and access certain capital gains reliefs on sale, including rollover relief and entrepreneurs' relief. Ordinary residential landlords have not had full mortgage interest relief since 2020, when it was replaced by a 20% tax credit. From April 6, 2025, holiday let owners lost the special treatment and were folded into the same rules as any other landlord letting residential property.

Why some owners say they came out ahead

The survey's finding that nearly half of respondents report higher profits despite losing those reliefs points to a few likely explanations rather than one clean cause. Owners who raised nightly rates or cut costs to absorb the higher tax bill would show improved profit even with a worse tax position. Others may have benefited from strong occupancy over the period, independent of the tax change entirely. It is also possible that owners who were already marginal sold up or switched to long-term letting before the rules changed, leaving a smaller, better-performing pool of holiday let owners behind to answer the survey. None of that means the tax change was good for the average owner: it means the owners still in the business adapted, or were already positioned to withstand it.

What this changes for operators now

The result does not undo the loss of mortgage interest relief or capital allowances, and owners still need to budget for a higher effective tax rate on borrowed capital than they had before April. What it does suggest is that the sector has not seen the wave of exits some predicted, and that pricing and occupancy discipline can offset a chunk of the tax hit for owners who manage their listings actively. Anyone still assessing the damage from the changeover should run the numbers with an accountant rather than assume the old FHL-era return, and should treat this survey as one data point on sentiment, not proof that the tax change was cost-neutral. Lending appetite in the sector has held up even as the reliefs disappeared, which mortgage brokers have also reported in recent months.