The furnished holiday lettings (FHL) tax regime was abolished for Income Tax and Capital Gains Tax from 6 April 2025. Holiday let income is now simply part of your property business, taxed like any other rent. For Making Tax Digital for Income Tax that makes things simpler rather than harder: there is no separate holiday let business to report, and your holiday lets go into the same quarterly update as the rest of your UK lettings.
Here is what changed, and what it means if you let holiday cottages, a flat on Airbnb or any other short-stay property.
What the end of the FHL rules changed
The government's policy paper says income and gains from a furnished holiday let now form part of your UK or overseas property business and are treated in line with all other property income. Its clarification note spells out the effects:
- Mortgage interest. Individual landlords now get relief on finance costs at the basic rate of 20%, the same restriction that applies to other residential lets. See Section 24 explained.
- Capital allowances. No longer available on new spending on fixtures, furniture or furnishings. Replacement of domestic items relief is available instead. Allowances on spending already in a pool by 5 April 2025 can carry on until the pool is used up.
- Losses. FHL losses, current or carried forward, are treated as losses of your ongoing UK or overseas property business.
- Jointly owned holiday lets follow the normal joint ownership rules, including the 50/50 default for spouses and civil partners.
- Unchanged: VAT, council tax and business rates. You also do not have to change how you let the property.
Does holiday let income count towards the MTD threshold?
Yes. Holiday let rent is property income, and HMRC's clarification note says it has always been property income rather than trading income. It counts towards your qualifying income at its gross amount, before cleaning, platform fees, mortgage interest or any other cost. Add it to your other rents and any self-employment turnover, and compare the total with the threshold: over £50,000 on your 2024/25 return for April 2026, over £30,000 on 2025/26 for April 2027, and over £20,000 on 2026/27 for April 2028.
Whether an activity is property income or a trade depends on what you provide and how the profit is made; HMRC treats profit from exploiting land as property income. If what you run is really a trade, the income still counts towards your qualifying income, but it is reported as self-employment rather than as part of your property business.
One UK property business, one quarterly update
All your UK lettings, whether long lets, holiday lets or rooms, form one UK property business for Making Tax Digital. You do not keep separate digital records per property, and your software adds everything into a single quarterly update. Holiday lets abroad belong to your foreign property business instead, which has its own update and, for foreign property, separate records for each property.
Airbnb and other platform payouts
Booking platforms and letting agencies usually pay you after taking their fees, so the payout in your bank is a net figure. HMRC's guidance on digital records is clear about this: if you only know your income after expenses, find out the full amount, record that as income, and record the expenses separately. In practice:
- record the booking income before the platform's fees;
- record the platform's fees and commission as an expense;
- record cleaning, laundry, changeover costs, utilities and repairs as you pay them.
Your platform's earnings report usually shows the gross bookings and the fees for each payout, which is what you need.
What each record needs
For every item of income or expense: the amount, the date it was received or incurred, and the category. Making Tax Digital uses the same categories as Self Assessment. If your total UK property turnover is under £90,000 you can use simpler categories, but residential landlords must still separate out residential finance costs such as mortgage interest, because they are relieved differently.
Deadlines
Holiday lets follow the same calendar as every other property: quarterly updates by 7 August, 7 November, 7 February and 7 May, and the tax return by 31 January after the tax year. Seasonal income does not change that. If a quarter has no bookings and no costs, you still send the update. The full calendar is in our MTD deadlines guide.
Letting a room in your own home
If you let furnished accommodation in your own home, the Rent a Room scheme lets you receive up to £7,500 a year tax-free, or £3,750 if the income is shared. Under Making Tax Digital you may still need digital records of that income, for example if you have other UK property income. HMRC's guidance on digital records explains when.
How VoxaMTD treats holiday lets
VoxaMTD records holiday lets as UK property, alongside your other lettings, and includes them in your UK property quarterly update. Properties that were set up as furnished holiday lettings are flagged to show that the regime has ended. VoxaMTD does not yet send foreign property updates, so holiday lets abroad need software that supports them. Sending UK property quarterly updates is free.
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This guide is general information based on government publications and HMRC guidance as at 27 September 2026. It is not tax advice. The end of the FHL regime has capital gains and capital allowances effects not covered here, so take advice if you are selling or reinvesting.