With tax changes taking effect and the rental landscape shifting, many landlords are now reconsidering the future of their furnished holiday lets (FHLs). If you’ve been operating a short-term rental, a key question to ask yourself in 2025 is:
Should you convert your holiday let into a long-term rental?
This guide explores what has changed, what to consider, and how to decide if it’s the right move for your property.
What Changed in 2025?
The Furnished Holiday Lettings (FHL) tax regime was officially abolished earlier this year for companies (from 1 April 2025) and is set to end for individuals, partnerships, and trusts on 6 April 2025.
Key impacts include:
- Capital allowances no longer apply to FHLs. You can only claim for replacement domestic items, as with standard residential lettings.
- Capital Gains Tax reliefs such as Business Asset Disposal Relief and rollover relief are no longer available for FHLs.
- Mortgage interest is no longer fully deductible. Instead, a basic rate tax credit applies—just like standard buy-to-lets.
- Rental income from FHLs no longer counts as “relevant earnings” for pension contributions.
In short, holiday lets are now treated the same as long-term lets for tax purposes—without the consistency and stability that long-term tenancies typically provide.
Holiday Let vs. Long-Term Let: A Quick Comparison
| Category | Holiday Let | Long-Term Rental |
| Income | Higher during peak seasons | Predictable and steady |
| Occupancy Risk | High (off-season downturns) | Low if tenant demand is strong |
| Management Requirements | High – cleaning, bookings, guest turnover | Low – fewer admin tasks |
| Tax Treatment (post-2025) | Same as long-term lets, less predictable use | Consistent and simple |
| Financing | May be harder post-FHL regime | Easier access to mortgages and remortgages |
| Legal Obligations | Fewer up front, but less regulated | Regulated under tenancy law, more structured |
Questions to Help You Decide
Is your holiday let still profitable after tax changes?
With tax benefits removed, you’ll need to assess whether the return still justifies the work involved.
Is there strong tenant demand in your area?
If so, a long-term tenancy could generate stable income with less seasonal fluctuation.
Do you want to reduce your management workload?
Long-term lets generally require less day-to-day oversight than short-term stays.
Is your property suited to long-term living?
Consider the location, amenities, and layout. Is it suitable for tenants like families, professionals, or students?
Benefits of Switching to a Long-Term Rental
- Regular monthly income with fewer void periods
- Lower management and maintenance burden
- More favourable financing options from lenders
- Easier long-term financial planning and budgeting
- Tenancy regulations can offer clarity and protection for landlords
Things to Watch Out For
- Long-term lets come with additional responsibilities, such as deposit protection and tenant rights compliance.
- Mortgages and insurance products may be treated differently depending on the property use. Some holiday let mortgage products may not allow long-term tenancies, and insurance policies may need to be updated.
- You may need to secure a landlord licence depending on your location.
- Ending holiday letting may require cancelling bookings or altering how your property is marketed.
Next Steps
If you’re seriously considering making the switch:
- Speak to a tax advisor to understand the financial implications of both rental types.
- Get a local letting agent’s opinion on achievable monthly rent and tenant demand.
- Talk to your mortgage provider to ensure the loan terms support a long-term tenancy.
Final Thoughts
With the tax advantages of holiday lets now largely removed, the long-term rental model may now offer a more stable and sustainable path for many landlords. If you’re seeking consistency, less hands-on management, and clearer tax treatment, now is the time to re-evaluate your strategy.
If you’d like to discuss your options further, get in touch with us here. We’d be happy to help.
