Should i sell before the end of the fhl regime

The Furnished Holiday Let (FHL) regime has been a popular tax shelter for UK property investors for decades, but the winds of change are blowing. From 1 April 2024, significant changes to how FHL income is taxed have come into effect, prompting many property owners to ask: should I sell my holiday let before these new rules bite?

As a Worcester-based accountancy firm, we’ve fielded this question repeatedly over recent months. The answer isn’t straightforward—it depends entirely on your individual circumstances. However, understanding the changes is crucial before you make any decision.

What’s changing with the FHL regime?

Historically, FHL properties offered an attractive tax advantage: furnished holiday let losses could be offset against other income, providing valuable relief for investors. From April 2024, however, this luxury has been curtailed significantly.

Under the new rules, FHL losses can no longer be carried back or offset against general income. Instead, they can only be carried forward against future FHL profits. For many landlords, particularly those running at a loss or breaking even, this removes a substantial tax benefit.

Additionally, the corporation tax treatment has changed. Limited companies claiming FHL status previously benefited from lower capital gains tax rates on disposal. These reliefs have now been removed, meaning corporate FHL owners face full corporation tax rates on gains.

The intention behind these changes is clear: the government views furnished holiday lets as a business activity rather than a personal investment, and has aligned the tax treatment accordingly.

The case for selling before April 2024

If you’re reading this after April 2024 has passed, this section is largely historical. However, understanding the logic helps clarify your current position.

Before the regime changes took effect, selling a profitable FHL could be attractive because you’d crystallise any gains under the old, more favourable rules. You’d also preserve any carried-forward losses, which could be offset against the proceeds.

For limited company owners, the removal of capital gains relief made selling even more compelling—locking in gains under the previous treatment avoided future corporation tax at 25%.

Assessing your current position

If you’ve held through April 2024, you’re now operating under the new regime whether you like it or not. The question becomes: does your FHL still make financial sense?

Start by analysing your annual performance. Are you making consistent profits? If yes, the FHL loss restrictions probably won’t affect you materially—losses aren’t an issue if there aren’t any.

Are you running losses? This is where the new rules bite hardest. Losses can no longer relieve your other income (employment income, pension, other property, etc.). Instead, they sit on the balance sheet, available only to offset future FHL gains. For many investors, this fundamentally changes the investment proposition.

You should also consider your broader tax position. What’s your marginal rate? If you’re a higher or additional rate taxpayer, the loss of offset relief was particularly valuable. If you’re a basic rate taxpayer, the impact is less severe.

Finally, consider the performance of your property itself. Holiday let markets vary significantly by region. A struggling Cotswolds cottage will perform differently to a thriving Lake District cabin. Is occupancy dropping? Have running costs increased? These operational factors matter as much as the tax regime.

What should you do now?

If you’re contemplating sale, don’t let tax tail wag the investment dog. The core question should always be: is this property performing well and aligned with my financial goals?

That said, the FHL regime changes have genuinely diminished the tax appeal of these properties. If you were holding primarily for the loss relief benefit, it’s reasonable to reconsider.

Before deciding, run the numbers carefully. What’s your realistic occupancy rate? What are your actual costs—both fixed and variable? What could you earn by deploying capital elsewhere? A commercial holiday let spreadsheet beats speculation every time.

For those considering sale, timing can matter from a stamp duty perspective (though this is separate from the FHL changes), and planning around your own tax year end is sensible.

Final thoughts

The furnished holiday let regime has fundamentally shifted. It’s no longer the tax-advantaged investment vehicle it once was. Whether that means you should sell is a deeply personal decision that depends on your specific circumstances, your investment objectives, and your broader financial picture.

For tailored advice, contact Severn Accounting—we’re here to help.