Lwfansau Cyfalaf: Mae'r Gyfundrefn FHL wedi Dod i Ben, Ond Mae Amser o Dal i Hawlio
A key deadline approaching
The Furnished Holiday Lettings (FHL) regime ended on 6 April 2025, closing one of the most generous tax treatments available to small property businesses.
While the regime has now officially ended, there remains a valuable window of opportunity for owners and advisers preparing 2024/25 tax returns. Claims for capital allowances on qualifying expenditure made before the end of the FHL regime can still be identified and included in returns being filed now.
If you own or manage an FHL, or advise clients who do, it’s worth understanding what can still be done, particularly in relation to lwfansau cyfalaf.
What’s changed
From April 2025, the FHL rules were abolished. This means:
• Income and expenditure from holiday lets will now be treated like that of standard residential letting businesses.
• Owners have lost access to special provisions such as business asset disposal relief, pension contributions based on profits, and crucially the wider scope of plant and machinery allowances.
• Relief for new expenditure now falls under the much narrower replacement of domestic items rules instead.
The change applies to both individuals and companies. However, existing capital allowances pools created before the regime ended can continue to be written down in future years.
Why it still matters
Many FHL owners have never claimed capital allowances, particularly where the property was purchased as a standard residential sale from private individuals.
Provided ownership continues, it is still possible to identify and pool historic qualifying expenditure for capital allowances purposes. Once pooled, that expenditure remains eligible for writing-down allowances in future years.
The key point is that claims can still be introduced in 2024/25 tax returns, or via amendments to recent years’ returns (within the usual amendment and overpayment relief time limits).
Even though the FHL regime itself has ended, HMRC still accepts retrospective capital allowances claims on qualifying expenditure incurred before 6 April 2025, as long as the property met the FHL criteria at the time and remains owned by the same taxpayer.
Typical levels of claim
Based on recent furnished holiday-let surveys, it is common to find 20–25 percent of the original purchase price qualifying as plant and machinery.
For example, on a property purchased for £400,000, qualifying expenditure could range between £80,000 and £100,000.
At the higher-rate band of income tax (40 percent), that equates to £32,000–£40,000 in potential tax savings, spread over time through writing-down allowances, or more quickly where recent qualifying improvements (within the last two years) can attract Annual Investment Allowance (AIA).
Qualifying assets often include:
• Central heating and hot-water systems
• Electrical and lighting installations
• Kitchen fittings and sanitary ware
• Ventilation or air-conditioning systems
• Built-in furniture, flooring and other integral features
What advisers and owners should do now
• Review any property that qualified as a furnished holiday let during ownership up to April 2025.
• Confirm whether the seller was a private individual (if so, a clean Section 562 entitlement may exist).
• Locate the sale contract, completion statement, fixtures and fittings list, and Land Registry title.
• Instruct a capital-allowances specialist to identify qualifying plant and machinery and prepare an HMRC-compliant valuation report.
• Coordinate with the accountant to ensure the claim is reflected in the 2024/25 tax return or within the allowable amendment window.
Sut y gall CA Select helpu
At CA Select, we specialise exclusively in capital allowances for commercial property owners and furnished holiday-let investors.
Ni:
• Confirm entitlement under the Capital Allowances Act 2001
• Undertake a detailed valuation and schedule of qualifying assets
• Prepare a full HMRC-compliant report for your accountant
• Work on a results-based fee structure
If, following our due diligence, no qualifying claim exists, no fee is charged.
We recommend that FHL owners finalising their 2024/25 self-assessment returns act now to ensure any remaining relief is captured before submission.
To discuss a property or obtain an estimate, please contact CA Select Cyf at www.caselect.co.uk or email office@caselect.co.uk.
Disclaimer
This article provides general information and should not be taken as tax or legal advice. Circumstances vary, and professional advice should be sought from a qualified accountant or tax adviser before acting.
