What Counts as a Furnished Holiday Let for HMRC

Owning a property that qualifies as a furnished holiday let (FHL) can bring valuable tax benefits compared to standard rental properties. HMRC treats FHLs as a trading business rather than an investment, which means landlords can claim capital allowances, deduct mortgage interest in full, and benefit from favourable capital gains tax reliefs. However, to qualify, your property must meet specific conditions. This article explains what HMRC considers a furnished holiday let, the rules you must meet, and how to ensure your property is eligible.

What Is a Furnished Holiday Let

A furnished holiday let is a property that is fully furnished and available for short-term holiday rentals to paying guests. It can be a house, flat, or cottage located anywhere in the UK or within the European Economic Area (EEA).

HMRC classifies an FHL as a trading property rather than a traditional buy-to-let, which means it is treated differently for tax purposes. The property owner can deduct a wider range of expenses, claim capital allowances on furniture and equipment, and may qualify for business-related tax reliefs when selling the property.

HMRC’s Criteria for a Furnished Holiday Let

For your property to qualify as a furnished holiday let, it must meet three main tests each tax year: the availability condition, the letting condition, and the pattern of occupation condition.

1. The Availability Condition

The property must be available for letting to the public for at least 210 days in the tax year.

You can include time listed on booking websites, holiday rental platforms, or your own marketing, but you cannot count any days when the property is occupied by you, your family, or anyone staying free of charge.

2. The Letting Condition

Your property must be actually let to paying guests for at least 105 days each tax year.

These lettings must be to members of the public on a commercial basis. Periods when family or friends stay rent-free or at reduced rates do not count toward the total.

If you own more than one FHL, you can sometimes use averaging elections or period of grace elections to meet this requirement, which allows flexibility if you fall short in one year due to low demand or maintenance work.

3. The Pattern of Occupation Condition

To prevent properties being classed as long-term rentals, HMRC requires that the property is not let to the same person for more than 31 consecutive days, and that long-term lets of this kind do not exceed 155 days in total during the tax year.

This ensures the property is genuinely used for short-term holiday lettings rather than as a permanent residence.

Furnishing Requirements

To qualify as a furnished holiday let, the property must be sufficiently furnished so guests can live there comfortably without bringing their own essentials.

This usually includes:

  • Beds, tables, and chairs.

  • Kitchen appliances such as a cooker, fridge, and microwave.

  • Sofas and basic living room furniture.

  • Crockery, cutlery, and cooking utensils.

If the property is unfurnished or only partly furnished, it will not qualify for FHL status, even if it meets the letting and availability tests.

Location Rules

A furnished holiday let can be located anywhere in the UK or within the European Economic Area (EEA). HMRC treats UK and EEA FHLs separately, meaning:

  • You must meet the conditions for each region independently.

  • Income and expenses from UK FHLs and EEA FHLs cannot be combined for tax purposes.

If your property is outside the EEA, it cannot qualify as an FHL under UK tax law.

What Happens If You Do Not Meet the Conditions

If your property fails to meet the FHL conditions in a given tax year, it will be treated as a standard rental property for that period.

This means:

  • You cannot claim capital allowances on furnishings or equipment.

  • Mortgage interest deductions are restricted.

  • Business reliefs, such as Entrepreneurs’ Relief or Business Asset Disposal Relief, do not apply on sale.

However, if you miss the letting condition due to unforeseen circumstances such as seasonal downturns or cancellations, you may be able to make a period of grace election. This allows your property to keep FHL status for up to two years, provided you can show a genuine intention to meet the criteria.

Tax Advantages of Furnished Holiday Let Status

Qualifying as a furnished holiday let provides several tax benefits that standard rental properties no longer receive.

1. Capital Allowances
You can claim capital allowances on furniture, fixtures, and equipment used in the property, such as beds, appliances, and lighting. These deductions reduce your taxable profit.

2. Full Mortgage Interest Deduction
Unlike standard buy-to-lets, you can still deduct the full cost of mortgage interest against rental income for FHLs, lowering your overall tax bill.

3. Capital Gains Tax Reliefs
When you sell a furnished holiday let, you may be eligible for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), Rollover Relief, and Gift Relief. These can reduce or defer Capital Gains Tax.

4. Pension Contributions
Profits from a furnished holiday let count as earned income for pension contribution purposes, allowing you to save more into a pension while claiming tax relief.

Record Keeping and Reporting to HMRC

You must declare your FHL income and expenses to HMRC through your Self Assessment tax return.

Keep detailed records of:

  • All bookings and rental income.

  • Availability calendars showing marketing and letting periods.

  • Receipts and invoices for property expenses, furniture, and maintenance.

  • Evidence of marketing activity to show the property was available to the public.

Good record keeping is essential to prove FHL status if HMRC ever requests evidence.

Example of How the Rules Apply

Suppose you own a seaside cottage that is available for rent all year except for two weeks when you stay there personally. That means it is available for 350 days.

It is successfully rented out to paying guests for 120 days, with no single guest staying longer than 14 nights. Because it exceeds the 210-day availability and 105-day letting requirements, and does not breach the long-term occupation limit, it qualifies as a furnished holiday let for that tax year.

Why Professional Advice Is Important

The tax rules around furnished holiday lets can be complex, particularly if you own multiple properties or operate through a company. An accountant experienced in FHL taxation can:

  • Confirm whether your property meets HMRC’s qualifying tests.

  • Help you make averaging or period of grace elections.

  • Calculate your capital allowances accurately.

  • Advise on structuring ownership for maximum tax efficiency.

Professional advice ensures you stay compliant and benefit fully from the reliefs available to FHL owners.

Summary

A property counts as a furnished holiday let for HMRC if it is fully furnished, available for at least 210 days, let for at least 105 days, and not occupied by long-term tenants for more than 155 days a year. Meeting these conditions gives you access to valuable tax advantages, including full mortgage interest relief, capital allowances, and capital gains tax reliefs.

Keeping good records and working with an accountant ensures you maintain compliance with HMRC and make the most of your furnished holiday letting business.