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Our furnished holiday let tax guide gives you a brief rundown of the holiday let tax rules.

If your property can be classed as a Furnished Holiday Let (FHL), it allows you to have certain tax benefits that are normally only available to trading businesses.

The holiday let can be a house, cottage, flat, suite of rooms or caravan, so long as it meets certain criteria.

How Does My Holiday Home Qualify as an FHL?

What Are the Furnished Holiday Let Tax Benefits? (Business Rates Relief)

Value Added Tax (VAT)

What Will Be Classed as an Expense in an FHL?

How Does My Holiday Home Qualify as an FHL?

To qualify for the benefits and allowances, your cottage will be classified as a ‘trade’ by the HMRC and will need to meet the following criteria:


  • Commercially let with the view to make a profit 

Your holiday home must be let on a commercial basis and with the view of making a profit.

Using a holiday letting agency like Menai Holidays, we will help to ensure you see the best possible returns on your holiday cottage, whilst receiving the most up-to-date advice possible.


  • Furnished to a certain standard

Stating the obvious we know, but the house must be furnished.

There are no rules that specify how much furniture you need. 

Furnishing the property as you would expect to find a holiday cottage yourself, you will be on the right track.

Our dedicated owner team would be very happy to pop out and meet you at your holiday home to help point you in the right direction with the final furnishings and finishing touches.


  • Availability to and occupancy of your holiday let

There are three main conditions that you must comply with in Wales. 

  1. Be available for commercial holiday letting to guests and holidaymakers for at least 210 days per year 
  2. Your holiday home must be rented out to the public for at least 105 days of the 210 days you have made available. Family use of the property doesn’t count towards the total.
  3. If occupied by the same person for more than 31 days, there shouldn’t be more than 155 days of such ‘long term occupation’.

If you have multiple furnished holiday lets, the occupancy requirements for each let can be calculated as an average for all days against all of the properties, so if one holiday home fails to meet the condition it may be ‘buoyed up’ by other properties. 

A Guide to Furnished Holiday Let Taxation | Menai Holiday Cottages

What Are the Furnished Holiday Let Tax Benefits?

  • Claiming Capital Allowances back

Capital Allowances can be claimed on the purchase, construction or refurbishment of your holiday let, there is no time limit to make a claim.

You can also claim capital allowances for items such as cookers, fridges, televisions, sofas, tables, carpets, curtains, etc.

To claim capital allowances you must be

  • An FHL (Furnished Holiday Let) for tax purposes (must meet the FHL criteria –  see above)
  • Pay tax in the UK
  • Invested over £100k on the purchase, building, converting or refurbishing a holiday let property

If you’d like to learn more about capital allowances, you can speak to our official partner Zeal who are capital allowance specialists for a FREE consultation.

If you are eligible to make a claim, Zeal offers our owners a 10% discount on their fees, which are on a No Win/No Fee basis.

You can call them on 01633 499771 or

You can also visit their site through your owner portal, make sure you make them aware you are a Sykes family owner.


  • Tax-advantaged pension contributions

Income from your property counts as ‘relevant earnings’ for pension contribution purposes. This means that tax-advantaged pension contributions can be made.


  • Capital Gains Tax relief

If you ever get to the stage where you need/want to sell your property, CGT relief can be claimed on a property, which is normally only available to trading ventures. These include:


  • Entrepreneurs’ Relief

This means you’ll only pay tax at 10% on all gains on qualifying assets rather than 18% or 28%.


  • Roll-over relief

Business asset rollover allows specific chargeable gains to be deferred if new trading assets are acquired.

Gains on the sale of your property can be deferred using this relief and the acquisition of an FHL property can count as a new trading asset allowing gains on the other assets to be deferred.


  • Hold-over relief

Allowing chargeable gains, that would otherwise arise on a gift of the property to be deferred.


  • Split the Tax between partner

If the holiday home is owned jointly with a partner or spouse the profits can be split however you like for tax purposes, irrespective of the actual shares in their ownership of the FHL property.

Small Business Rate Relief

Any self-catering accommodation that is available to let for 140 days or more per year is subject to Business Rate tax.  You may, however, be able to claim Small Business Rate Relief which will reduce the amount of council tax you need to pay.

If your property’s rateable value is less than £15,000 you will be eligible for Small Business Rate Relief – you can calculate your property’s rateable value online with HMRC.


In Wales, Small Business Rate Relief is available on a property that is available to let for 140 days or more AND is let for 70 days or more.

As of April 2o23, this is scheduled to increase to being available to let for at least 252 days and will have been let for at least 182 days in any 12 months.

To receive an application form for Small Business Rates Relief you will need to contact the VOA (Valuation Office Agency) on 03000 505 505 or email


A Guide to Furnished Holiday Let Taxation | Menai Holiday Cottages

Value Added Tax (VAT)

If the turnover on your property exceeds the VAT threshold you will need to become VAT registered.

The current threshold is set at £85,000 per year. Most FHLs are unlikely to achieve this level of income unless your holiday home is a large or high-end house.

However, if you own multiple holiday lets or have separate businesses and are a VAT registered individual, your FHL income may be subject to VAT.

What Will Be Classed as an Expense in an FHL?

FHL are treated similarly to that of a business when it comes to expenses. This means expenses can be offset against the income on the holiday let, so long as they are:


  • Claimed against commercial use only

If the house is for private use, you will need to calculate what percentage of the expense is commercial

  • Are not capital 

Capital expenses are one-off payments for the purchase or construction of the property or its improvements


Below are some examples of expenses

  • Utility bills or refuse collection
  • Interest on loans associated with the property
  • Advertising or letting agency fees
  • Products purchased for the house (cleaning products and welcome packs)
  • Maintenance and cleaning costs.


For further advice on the financial side of holiday letting, we would always recommend that you speak to a qualified professional who will be able to give you the best possible advice.

You can speak to our official partner Zeal who are holiday letting tax specialists for a FREE consultation.

They speciailise in

  • Capital Allowances – Unlocking the tax savings on the purchase, construction, conversion or refurbishment of holiday lets
  • Tax Compliance – Annual tax return submissions
  • Tax Advice – Advice on how to structure a holiday let business for tax efficiency or to answer any complex tax queries

You can call them on 01633 499771 or

You can also visit their site through your owner portal, make sure you make them aware you are a Sykes family owner.

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