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Navigating the tax rules for furnished holiday lets (FHLs) is complex, encompassing business rates, VAT, stamp duty, and more. This guide offers a clear and current overview of the essential tax regulations that holiday let owners in Wales should be aware of as of January 2025.

The Furnished Holiday Let (FHL) tax regime has long provided valuable benefits to holiday let owners. However, significant changes are on the horizon. From 6 April 2025 for Income Tax and Capital Gains Tax, and from 1 April 2025 for Corporation Tax, the UK government will abolish the FHL regime. This means income from properties previously classified as FHLs will be treated like other rental income for tax purposes. Below, we provide an updated guide to the current rules and upcoming changes, including council tax and business rates requirements.

Keep reading for a full breakdown of Furnished Holiday Let Tax and Business Rates in Wales…


Here’s what we’ll cover:

Do I Need To Pay Council Tax?

Business Rates Relief

How Does My Holiday Home Qualify as an FHL?

What Are the Furnished Holiday Let Tax Benefits?

What Will Be Classed as an Expense in an FHL?

Value Added Tax (VAT)

Stamp Duty

Expert Tax Advice


Do I Need To Pay Council Tax?

If your property is used for personal purposes and not commercially let, you will be liable for council tax. However, properties meeting the criteria for business rates (outlined below) may qualify for Small Business Rates Relief instead.

In Wales, as of April 2023, councils can impose a premium on council tax for second homes. The rate varies across local authorities, with some councils imposing up to a 100% premium, effectively doubling the standard council tax rate. Check with your council or letting agent for specific details.

Holiday let tax


Small Business Rates Relief

Properties used as self-catering accommodation must be available to let for at least 252 days per year and actually let for 182 days to qualify for business rates in Wales. If eligible, you can apply for Small Business Rates Relief through your local authority, which may reduce your tax liability depending on your property’s rateable value.

To determine your property’s rateable value, contact the Valuation Office Agency (VOA) or use the online calculator on the HMRC website.

Applications for Small Business Rates Relief can be made via the VOA by calling 03000 505 505 or emailing ratingwales@voa.wales.gov.uk.

Head to our blog Navigating the New Holiday Let Rules in Wales for more specific information.


How Does My Holiday Home Qualify as an FHL?

Before the abolition of the FHL regime in April 2025, properties must meet these criteria to qualify:

  • Commercially Let: The property must be let with the intention of making a profit.
  • Furnished: The property must be furnished to a standard suitable for holiday accommodation.
  • Availability and Occupancy: In Wales, the property must be available for letting 252 days per year and let for at least 182 days.

If you are unable to meet the letting criteria in a tax year for exceptional circumstances (e.g. COVID or refurbishment), HMRC does allow a ‘Period of Grace Election’.

If you own multiple furnished holiday lets, your occupancy requirements for each let can be calculated as the average of all the days across all of the properties. Therefore, if some of the holiday homes fail to meet the occupancy requirements, other holiday homes may be able to fill in for them.


What Are the Furnished Holiday Let Tax Benefits?

Note: These benefits will no longer apply from 1 April 2025. Until then, they include:

    • Capital Allowances: Claims can be made on purchases, construction, or refurbishments, including items like furniture and appliances.
    • Tax-Advantaged Pension Contributions: Income from FHLs counts as “relevant earnings,” enabling tax-efficient pension contributions.
    • Capital Gains Tax (CGT) Relief: Includes Entrepreneurs’ Relief, Roll-Over Relief, and Hold-Over Relief, allowing for reduced or deferred CGT liabilities.
    • Income Splitting: For jointly owned properties, profits can be split for tax purposes, regardless of ownership shares.

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 sykes@gozeal.co.uk. You can also visit their site through your owner portal- make sure you make them aware you are a Sykes family owner.


What Can Be Classed as an Expense in an FHL?

FHL expenses are treated like business expenses and can be deducted from your holiday let income, provided they meet these conditions:

  • 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

Expenses offset against income include:

  • Utility bills and refuse collection
  • Loan interest related to the property
  • Advertising and letting agency fees
  • Maintenance, cleaning, and consumables

Capital expenses, such as property purchase or structural improvements, are not deductible but may qualify for capital allowances.


Stamp Duty (Land Transaction Tax in Wales)

As of December 2024, Wales has increased the higher residential Land Transaction Tax (LTT) rates. The updated rates for additional residential properties, effective from 11 December 2024, are:

  • Up to £180,000: 5%
  • £180,001 to £250,000: 8.5%
  • £250,001 to £400,000: 10%
  • £400,001 to £750,000: 12.5%
  • £750,001 to £1.5 million: 15%
  • Above £1.5 million: 17%

These higher rates apply to additional residential properties, such as second homes and buy-to-let properties. The standard residential rates remain unchanged, with the starting threshold at £225,000. Ensure you factor this into your financial planning.

Head to our Complete Guide to Second Home Stamp Duty in Wales to find out more.

Stamp duty


Value Added Tax (VAT)

If your holiday let generates more than £90,000 in annual taxable turnover (as of April 2023), VAT registration is required. While most holiday lets stay below this threshold, owners of multiple properties should check if VAT applies.

If your turnover exceeds the threshold, you’ll need to register for VAT and charge VAT on your holiday let income. However, even if turnover is below the threshold, voluntary registration may allow VAT recovery on expenses.


Need Tax Advice? Speak to an Expert Today!

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.

With significant changes on the horizon, seeking professional tax advice has never been more important. Our trusted partner, Zeal offer a FREE consultation and expert guidance in the following areas:

  • Capital Allowances
  • Tax Compliance
  • Tax Structuring

Stay Ahead of the Changes

The abolition of the FHL regime in April 2025 will have a significant impact on how holiday let income is taxed. Staying informed about the current rules and planning for the upcoming changes will ensure you can optimise your tax position and avoid unexpected surprises.

Be ready for the 2025 tax changes! For tailored advice and expert guidance, contact Menai Holidays today and ensure your business is prepared for the future.


Useful Links

  • Furnished Holiday Lettings Tax Guide (GOV.UK)
  • Capital Allowances & Balancing Charges (GOV.UK)
  • Business Asset Disposal Relief (GOV.UK)
  • Business Asset Rollover Relief (GOV.UK)
  • Gift Hold-Over Relief (GOV.UK)
  • Small Business Rate Relief (GOV.UK)
  • Furnished Holiday Lettings Helpsheet 2021 (GOV.UK)
  • New Tax Rules for Second Homes in Wales (Gov.Wales)

Note: The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA.As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.

As a holiday letting owner you are responsible for compliance with health & safety laws, regulations and guidance, and for having suitable insurances in place (not Sykes Holiday Cottages or its brands). From time to time, Sykes shares information with you on the topic of health and safety and insurance. When it does so, it is not providing you with advice (legal, financial, tax or otherwise); please seek your own as you see fit. In addition, it is not making any representations or warranties about the information being complete or free from errors or inaccuracies. Sykes shall not be liable for any loss or damage arising under or in connection with your reliance on it.

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