What's the biggest cash impact of FHL abolition?

For most owners with a mortgage, the loss of full mortgage interest deduction — now restricted to a 20% basic-rate tax credit. Higher-rate taxpayers with a £200k mortgage lose roughly £2,000/year; £400k mortgage £4,000/year. For mortgage-free owners, the biggest hit is the CGT increase on eventual sale — from 10-14% under Business Asset Disposal Relief to 24% standard residential CGT for higher-rate taxpayers.

Can I still claim Capital Allowances on my Cornwall holiday let?

Not for new spending after April 2025. Transitional rules let you continue claiming on Capital Allowances pools already in your books at 31 March / 5 April 2025 — these write down over time as before. But new fittings, fixtures and furnishings purchased after that date are not claimable as Capital Allowances. Replacement of domestic items relief (a standard residential landlord rule) is the available substitute, but it's narrower.

How does Form 17 work for joint ownership?

If a married couple or civil partners jointly own a Cornwall holiday let and want to split the rental profit in any ratio other than 50:50, they must file Form 17 with HMRC within 60 days of signing, with documented evidence of unequal beneficial ownership (usually a declaration of trust or deed). Without Form 17, the default 50:50 split applies regardless of who actually receives the income. This was less critical under FHL but now matters under the standard residential rules.

Should I incorporate my Cornwall holiday let into a limited company?

Usually not for 1-2 properties. Incorporation triggers CGT on transfer (you sell the property to your own company at market value), Stamp Duty (potentially the 3% surcharge), and ongoing extra accountancy costs. Companies do still get full interest deduction, so heavily leveraged 4+ property portfolios sometimes justify it. Talk to a holiday-let specialist accountant first — the maths is rarely as clean as it looks.

Do I still qualify for any business rates relief?

Yes — Small Business Rate Relief is unaffected. If your Cornwall holiday let qualifies for business rates (252 days available, 105 days let from April 2025) and has a Rateable Value below £15,000, you get partial or full relief. Full relief applies under RV £12,000 — meaning the bill is zero. This is a much better outcome than paying Council Tax + the 100% second-home premium. Hit the threshold if you can. Business rates guide.

The Furnished Holiday Let Tax Change Explained: What Cornwall Owners Need to Do

Q: When was the FHL tax regime abolished?

6 April 2025 for income tax and capital gains tax; 1 April 2025 for corporation tax. From that date, furnished holiday lets are taxed identically to standard residential rental properties. This was announced in the March 2024 Spring Budget and confirmed in subsequent HMRC guidance in late 2024 and 2025.

For more than 35 years the UK tax system gave furnished holiday lets a series of advantages that ordinary residential rentals never had: full mortgage interest deduction, Capital Allowances on fittings, pension contribution status, and (until 2024) Business Asset Disposal Relief on sale. The 2024 Spring Budget announced the abolition of this favourable regime, and from 6 April 2025 (1 April 2025 for corporation tax) it's gone. For Cornwall's many holiday let owners, the financial impact ranges from manageable to significant — and a meaningful number of marginal owners are quietly exiting the market.

What FHL status meant (in brief)

To qualify as a Furnished Holiday Letting (before April 2025), a property had to:

Be furnished and let on a commercial basis with a view to profit
Be available for letting at least 210 days per tax year
Actually be let for at least 105 days per tax year
Not be let to the same person for more than 155 days total during the year

If you qualified, four headline tax advantages applied:

Mortgage interest fully deductible against rental profit (not restricted to a 20% basic-rate tax credit, as for standard residential lets)
Capital Allowances on plant, machinery, fixtures, furnishings — typically tens of thousands of pounds of pool over a property's life
FHL profits counted as "relevant earnings" for pension contributions — useful for higher-rate taxpayers wanting to expand their pension annual allowance
Business Asset Disposal Relief (10%, recently increased to 14%) on sale — vs. standard 24% residential CGT rate

What changed on 6 April 2025

The headline: FHL status was abolished. Holiday lets are now treated identically to standard residential rentals for income tax, NIC and capital gains purposes. According to HMRC guidance issued in the Autumn 2024 and subsequent budget documents:

Mortgage interest — the biggest cash impact

Previously: fully deductible against rental income at your marginal tax rate. From April 2025: restricted to a 20% basic-rate tax credit (same treatment as standard buy-to-let).

Worked example. Higher-rate taxpayer (40%) with £8,000/year mortgage interest on a Cornwall holiday let:

Pre-April 2025 relief: £8,000 × 40% = £3,200/year saving
Post-April 2025 relief: £8,000 × 20% = £1,600/year saving
Net loss: £1,600/year for this single line, just from the rate restriction

For a leveraged owner with a £200k mortgage at 5%, this is approximately £2,000/year worse off. For a £400k mortgage, £4,000/year worse.

Capital Allowances — gone for new spending

Previously: you could pool up to tens of thousands of pounds in Capital Allowances on fitted kitchens, bathrooms, integrated furniture, heating systems, and similar "plant and machinery". From April 2025: no new Capital Allowances. Replacement of domestic items relief (used by standard residential landlords) applies instead — but it's narrower and lower-value.

Transitional rule: Capital allowances already pooled in your books by 31 March / 5 April 2025 continue to be claimed under the writing-down rules — they don't vanish overnight. But no new additions to the pool after April 2025 qualify as FHL Capital Allowances.

Pension contributions

FHL profits no longer count as "relevant earnings" for pension contribution purposes. Owners who relied on FHL profits to expand their annual pension allowance — particularly higher-rate taxpayers — have lost that planning tool. The pension annual allowance for standard income remains £60,000 (2025-2026), but FHL profits no longer add to that ceiling.

Capital Gains Tax on sale

Previously: holiday lets sold under the FHL regime qualified for Business Asset Disposal Relief — a 10% CGT rate (recently increased to 14% from April 2025 for new disposals) up to the £1m lifetime limit. Rollover relief into other qualifying business assets also applied.

From April 2025: standard residential CGT applies — 24% for higher-rate taxpayers, 18% for basic-rate (since the 2024 rate cut). For someone selling with a £200k capital gain on a Cornwall holiday let:

Pre-April 2025 (BADR at 14%): £200k × 14% = £28,000 CGT
Post-April 2025 (standard residential 24%): £200k × 24% = £48,000 CGT
Difference on this disposal: £20,000

Joint ownership — Form 17 now needed

Married couples or civil partners who own FHLs jointly previously had flexibility to split profits in any ratio. From April 2025, the default is a 50:50 split (HMRC's standard residential rule). To use any other split (commonly higher-share to the lower-earning spouse for tax efficiency), Form 17 must be filed within 60 days of signing, with documented evidence of unequal beneficial ownership. Form 17 on gov.uk.

What's still available?

Three things survive the FHL abolition that owners can still use:

1. Replacement of domestic items relief

Available to all residential landlords (FHL or post-FHL). Allows tax-deductible replacement of furnishings, white goods, carpets, curtains, on a like-for-like basis. Cannot be claimed on initial purchases or improvements — only replacements. Useful but a fraction of what the old Capital Allowances pool provided.

2. Standard expense deductions

All standard residential-rental expenses are still deductible: insurance, utilities (where paid by the owner), agency commission, cleaning, OTA fees, maintenance, accountancy fees, professional photography (revenue items), business rates if applicable. The day-to-day expense picture is largely unchanged.

3. Trading-style structure (consider with caution)

Some Cornwall holiday-let owners — particularly multi-property portfolios — are exploring whether their operation rises to the level of a "trade" for tax purposes (which would re-introduce some of the lost reliefs). HMRC's test for this is strict: it requires substantial services provided to guests beyond mere occupation (think bed and breakfast level — meals, daily service, concierge, on-site reception). For most Cornwall holiday lets this is impractical. Speak to a holiday-let-specialist accountant before pursuing this; getting it wrong invites HMRC scrutiny.

Who's hit hardest?

The financial impact ranges considerably by owner profile:

Hit hardest: leveraged higher-rate-taxpayer owners (£200k+ mortgages, 40%+ marginal rate). Combined loss of mortgage relief, Capital Allowances and BADR can easily exceed £5,000/year of net income plus £20,000+ on eventual sale.
Moderate impact: mortgage-free portfolio owners. Lose CGT advantage and pension contribution status; mortgage interest restriction is moot.
Smallest impact: owners with no mortgage, no near-term plans to sell, no pension-contribution motive. Mostly affected by loss of Capital Allowances for refurbishments.
Counter-intuitively, basic-rate taxpayers are barely affected by the mortgage interest restriction (because the 20% tax credit roughly matches their full deduction would have been).

What Cornwall holiday let owners should be doing now

1. Get a specialist tax review (essential)

Cornwall has several accountancy firms that specialise in holiday-let taxation. If you used FHL status and have a mortgage, it's worth a one-off review to model your post-2025 position. Cost: typically £200–£600 for a focused review. Saved tax: usually multiples of that, especially around CGT planning if you're considering a sale.

2. Review joint ownership arrangements

If you co-own with a spouse or civil partner and previously used a non-50:50 split, file Form 17 with documented evidence (deeds, declaration of trust, etc.) within 60 days. Otherwise the default 50:50 split applies whether you want it or not.

3. Reconsider company structuring (rare but possible)

A small number of higher-volume Cornwall owners are moving holiday lets into limited companies to recapture interest deduction (corporation tax allows full deduction). The drawbacks are significant: extra accountancy cost, double-taxation of profit (CT then dividend tax), CGT on incorporation. Almost never worth it for one or two properties; potentially viable at 4+ properties with significant mortgage debt.

4. Optimise your loan-to-value

If you're carrying a £400k+ mortgage on a Cornwall holiday let purely because the FHL interest deduction made it attractive, the case for deleveraging is stronger now. Speak to a mortgage broker familiar with holiday-let products and your accountant together.

5. Don't panic-sell, but model the CGT differential before you do sell

The CGT difference between pre-April-2025 (10–14% BADR) and post-April-2025 (24% residential) is large. Some owners are accelerating sales they'd planned for 2026–2028; others are delaying because they think values will recover. Don't make this decision without modelling your specific position.

The marginal-owner exit

The combined effect of FHL abolition (April 2025), the business-rates threshold increase (from 70 days let to 105 days let, also April 2025), and Cornwall Council's 100% second-home premium (from 1 April 2025) has been to squeeze marginal Cornwall holiday-let owners considerably. We're seeing several quiet exits in 2025-2026 — small portfolio investors who can't quite hit the 105-day threshold, who don't qualify for business rates, who get hit with the second-home premium, and who lose the mortgage-interest relief at the same time.

The market hasn't crashed. The good operators are still doing well. But the easy years are over, and the gap between professionally-managed, well-located holiday lets and marginal ones has widened.

Bottom line

The FHL regime is gone. Cornwall holiday lets are now standard residential rentals for tax purposes. Highly-leveraged higher-rate-taxpayer owners are worst affected; mortgage-free portfolio owners much less so. Action items: review your tax position with a specialist, file Form 17 if you're in unequal joint ownership, hit the 105-day business-rates threshold if you can, and don't make panic decisions about selling without modelling the CGT differential.

For property-management decisions in the new tax landscape, submit your details and we'll match you with a Cornwall agency that understands the post-FHL economics.