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What is UK Furnished Holiday Lettings (FHL)?
UK Furnished Holiday Lettings (FHL) refers to a special tax status for short-term rental properties in the United Kingdom governed by HM Revenue & Customs (HMRC). Properties that meet the qualifying criteria are treated as a trade for certain tax purposes.
This status offers more favorable tax treatment compared to standard long-term buy-to-let properties.
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How it works
To qualify as an FHL, a property must be located in the UK or European Economic Area (EEA), be adequately furnished, and be let commercially with an intent to make a profit. The property must be available for commercial letting for at least 210 days in the relevant period and must actually be let for at least 105 of those days.
Additionally, periods of longer-term occupation (over 31 continuous days by the same person) must not exceed 155 days in total. Property owners are required to keep accurate records of availability and bookings to prove they meet these thresholds.
Why it matters
The FHL regime is important for property owners because it unlocks significant tax benefits not available to landlords of standard residential lets. These include the ability to claim capital allowances for furniture, fixtures, and equipment, and eligibility for certain Capital Gains Tax reliefs like Business Asset Disposal Relief and Rollover Relief.
Furthermore, profits from an FHL count as 'relevant earnings' for pension contribution purposes, allowing owners to increase their pension savings.
Examples
- A host in Scotland has a property that is let for 100 days. They own a second qualifying FHL in Wales that was let for 110 days, allowing them to use the 'averaging election' to meet the 105-day threshold for both properties.
- A cottage owner in the Cotswolds ensures their property is available for booking 250 days a year and achieves 120 days of actual lets, successfully qualifying for FHL status.
- An investor purchases a seaside apartment and spends £10,000 on new furniture. Because the property qualifies as an FHL, they can claim this cost as a capital allowance to reduce their taxable profit.
- After several years, an FHL owner sells their property. Due to its qualifying status, they are able to claim Business Asset Disposal Relief, which may significantly reduce their Capital Gains Tax liability.
Frequently asked questions
What are the main occupancy conditions for a property to qualify as an FHL?+
What happens if my property doesn't meet the 105-day letting condition?+
How are profits from an FHL treated for pension and National Insurance purposes?+
Is an FHL subject to Council Tax or Business Rates?+
Related terms
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