Using FHL losses - Go Figure Financial | Bookkeeping Services Manchester

olivia26264

5 hours ago

2 min read

The former tax regime for furnished holiday lettings (FHL) came to an end on 5 April 2025. Prior to this date, properties which qualified as FHLs were kept separate from other lets.

This meant that where a loss was made on FHL, that loss could only be carried forward and set against future profits from the same FHL business.

However, from 6 April 2025 onwards, FHLs are treated in the same way as other residential lets. This means that income and expenses from properties let as furnished holiday accommodation are amalgamated with rental income and expenses from other properties owned by the same person in the same capacity to arrive at the profit or loss for the property business as a whole.

Where the former FHL business had unrelieved losses on 6 April 2025, these losses can be set against future profits from the combined property business, regardless of whether those profits derive from holiday lets, other residential lets or commercial lets.

Example

Georgina lets out two flats on long-term lets. She also lets out two holiday cottages as furnished holiday accommodation through Airbnb.

On 6 April 2025, she has unrelieved losses from her former FHL business of £12,000. The residential lets have always made a profit. She owns all the properties outright.

For 2025/26, the income and expenses in respect of each property are as follows:

Property Rental income Expenses

Flat 1 £20,000 £4,000

Flat 2 £12,000 £2,500

Cottage 1 £16,000 £8,500

Cottage 2 £5,000 £7,000

Total £53,000 £22,000

The profit for the property rental business is £31,000.

Georgina is able to set the losses brought forward from the former FHL business against the profit of the amalgamated property business, reducing the taxable rental profit to £19,000. It does not matter that in isolation she only made a profit of £5,500 from her holiday cottages. Relief for the loss is claimed in her 2025/26 tax return.