Letting the fhl for longer periods during the off season
FHL Tax Planning: Making the Most of Off-Season Lettings
If you own a furnished holiday let (FHL) in the UK, the off-season can feel like dead money sitting in your property portfolio. However, with HMRC’s recent changes to holiday let rules and careful tax planning, letting your FHL for longer periods during quieter months could actually work in your favour. In this post, we’ll explore the tax implications and practical steps to maximise your rental income whilst staying compliant with HMRC’s requirements.
Understanding FHL Status and the 105-Day Rule
First, let’s clarify what counts as a furnished holiday let for tax purposes. To qualify as an FHL, your property must be available for commercial holiday letting for at least 210 days per year, and actually let for at least 105 days per year. Many owners assume the off-season means they fall short of these thresholds, but that’s not necessarily the case.
The key word is “let” — and HMRC interprets this broadly. A property can be let by the week, fortnight, or month. The critical thing is that you’re genuinely offering it for holiday purposes and actively marketing it as such. If you’re considering longer-term lettings during the off-season, you need to be clear about your intent. Are these still holiday lets, or are you shifting into standard residential tenancy?
The Tax Advantage of Maintaining FHL Status
Staying within FHL classification brings real benefits. Most importantly, you can claim capital allowances on furnishings and equipment — something you cannot do with ordinary residential lettings. You can also offset losses against other income (subject to restrictions), and you’re not subject to the residential property allowance rules that limit tax relief for mortgage interest.
However — and this is crucial — if you transition into long-term standard residential lettings, you lose these advantages. From April 2020 onwards, residential landlords have seen their mortgage interest relief capped at 20% basic rate tax only. FHL properties are exempt from this restriction, which can represent significant savings if you have a large mortgage.
The decision to maintain FHL status versus switching to standard residential lettings should be made deliberately, not by accident.
Structuring Off-Season Lettings Correctly
If you want to let your FHL for longer periods whilst preserving its status, consider these approaches:
Holiday let extensions: Some owners successfully market three-month or even six-month “winter lets” or “seasonal lets” to tourists, contractors, or seasonal workers. The key is maintaining the holiday let character — think flexible terms, holiday-style furnishings, and marketing through holiday platforms.
Back-to-back holiday bookings: Rather than converting to a long-term let, you could accept multiple back-to-back shorter bookings. This keeps the holiday let nature intact and still provides income stability.
Mixed-use lettings: You might genuinely let some periods as holidays and others under different arrangements. However, you must keep detailed records and ensure the property genuinely meets the 105-day threshold measured over 12 months.
Record Keeping and HMRC Compliance
Here’s where many owners trip up. HMRC expects clear evidence that you’re operating as a holiday business. This means:
- Marketing materials showing the property is available for holiday lets
- Booking records demonstrating genuine holiday lettings
- Evidence of steps taken to maximise occupancy for holiday purposes
- A consistent approach year on year
If HMRC challenges your FHL status during a compliance check, your records need to tell a coherent story. Vague booking patterns or sudden shifts to long-term lets without proper documentation invite questions.
For the 2024/25 tax year, remember that you must declare all rental income on your Self Assessment tax return by 31 January 2025 (for the previous tax year). If your property spans two tax years with different statuses, your accountant needs to handle the split correctly.
Getting Your Strategy Right
Before you make changes to how you let your property, pause and think strategically. Moving from FHL to standard residential lettings isn’t easily reversed for tax purposes — HMRC will look at your genuine intent and how you’ve operated historically.
If you’re considering longer off-season lettings, the right move is to work with an accountant who understands FHL rules inside out. The tax savings from maintaining FHL status — especially around capital allowances and mortgage interest relief — often outweigh the convenience of standard residential lettings.
For tailored advice on structuring your holiday let lettings and maintaining compliance with HMRC, contact Severn Accounting — we’re here to help.