The Furnished Holiday Lettings (FHL) rules provide specific tax advantages for holiday lettings of properties that meet certain criteria, treating them as a trade for certain tax purposes. To qualify as an FHL, the following conditions must be satisfied:

Key Criteria for FHL Qualification

1. Commercial Letting: The property must be let on a commercial basis with the intent to realise profits. Second homes or properties let occasionally or to family and friends do not qualify.
2. Location: The property must be situated in the UK or in a country within the European Economic Area (EEA).
3. Furnishing: The property must be furnished adequately, meaning it includes sufficient furniture for normal occupancy, and guests must be entitled to use this furniture.

Occupancy Conditions

In addition to the key criteria, the property must meet the following three occupancy conditions:

1. Pattern of Occupation: The property must not be used for more than 155 days for longer-term occupation (i.e., a continuous period of more than 31 days).
2. Availability: The property must be available for commercial letting at commercial rates for at least 210 days per year.
3. Letting: The property must be let for at least 105 days per year, and homeowners should be able to demonstrate the income from these lettings.

Additional Provisions

• Averaging Election: If a business comprises multiple FHL properties, it is possible to average the number of letting days across the properties to meet the 105 days threshold.
• Period of Grace Election: This provision allows homeowners to treat a year as a qualifying year for FHL purposes if they genuinely intended to meet the occupancy threshold but were unable to do so, subject to certain qualifying conditions.

Upcoming Changes

In the 2024 Spring Budget, it was announced that the special tax benefits associated with FHL properties will be abolished from April 2025. Draft legislation, including an anti-forestalling rule, will be published in the future to prevent obtaining tax advantages through the use of unconditional contracts for capital gains relief under the current FHL rules. This rule will be backdated to apply from 6 March 2024.



For further guidance and assistance on FHL rules and how these changes may affect your property lettings, please contact our team of accounting professionals.