Capital Allowances on Furnished Holiday Lets After Abolition

The furnished holiday lettings regime was abolished from April 2025. For years it gave holiday-let owners a tax advantage that ordinary residential landlords never had, and the most valuable part of that advantage was access to capital allowances on the plant and machinery inside the property. This page deals with one narrow question that abolition leaves behind: what happens to capital allowances on furnished holiday lets now that the regime has gone. It is not a guide to the live FHL rules, because there are no live FHL rules any more. It is a transition page for owners who either claimed capital allowances in the past, or never claimed and are wondering whether the door is fully shut.

The short version is that a claim you already made is largely safe and keeps running, a claim you never made is on a closing clock, and any new spend on a former holiday cottage now gets nothing. The detail, and the one genuine opportunity that remains, is below. For the wider tax picture of abolition (income tax, capital gains tax and the loss of the trading treatment) see our pages on the end of the furnished holiday letting regime and what individual owners need to know. This page stays strictly on the capital allowances slice.

What abolition changed for capital allowances specifically

The furnished holiday lettings regime ended under Finance Act 2025 Schedule 5, taking effect from 1 April 2025 for corporation tax and 6 April 2025 for income tax. HMRC set out the change in its FHL abolition policy paper. From those dates a former FHL is no longer a separate qualifying activity. It is taxed as part of an ordinary UK property business (or overseas property business for a former EEA unit), exactly like a standard buy-to-let.

That reclassification is the whole story for capital allowances. An FHL used to be a qualifying activity, so its owner could pool the plant and machinery inside the property and claim allowances on it. An ordinary residential letting is not, because the dwelling-house restriction at section 35 of the Capital Allowances Act 2001 blocks plant and machinery allowances on anything provided for use in a dwelling. When the FHL carve-out disappeared, the property fell back inside that block. So the practical effect of abolition on capital allowances is simple to state: no new entitlement, from the abolition date, on a property that is a dwelling.

Three separate questions follow from that, and they have three different answers. What happens to a claim already made? Can a claim still be made for the period before abolition? And is there anything left to claim on the property going forward? Each is dealt with in turn.

Why furnished holiday lets could claim in the first place

It helps to be precise about what was lost, because it defines what a retrospective claim can still reach. An ordinary residential landlord gets no plant and machinery capital allowances at all on the contents and fixtures of the let dwelling. The kitchen, the bathroom fittings, the boiler, the wiring, the fitted furniture: none of it attracts allowances, because section 35 blocks plant in a dwelling-house. The landlord's only relief for those items is a revenue deduction when they are replaced.

An FHL was different. Because it was a qualifying activity, described in HMRC's historic furnished holiday lettings guidance, its owner could treat the same items as qualifying plant and integral features, pool them, and claim the annual investment allowance or writing-down allowances against the FHL profits. On a well-equipped holiday cottage the qualifying plant frequently amounted to a meaningful share of the purchase price or fit-out cost, covering everything from the heating and hot water systems to sanitaryware, fitted kitchens, electrical installations and cold-water and general lighting systems that count as integral features, all within the plant and machinery rules HMRC explains at gov.uk on claiming capital allowances. Our page on integral features sets out which categories of asset those are. That entitlement is what abolition removed for new spending, and it is what a retrospective claim, if the timing allows, is trying to reach for the years before abolition.

Can you still make a retrospective claim for the pre-abolition years?

This is the only live opportunity on the page, and it is time-limited. Many holiday-let owners never made a capital allowances claim at all. They ran the cottage for years, employed a general accountant who treated the fixtures as part of the property and never separated out the plant, and simply never pooled it. For those owners the question is whether the door is entirely closed now that the FHL regime has gone.

It is not automatically closed, but the window is narrow. Capital allowances are claimed through the tax return, and qualifying expenditure can be brought into a pool in any tax return for a period in which the qualifying activity was still being carried on and which is still open to amendment. There is no separate long-stop time limit on pooling historic expenditure. The constraint is the ordinary return amendment window. So the route for an owner who never claimed is to pool the fixtures in a final FHL tax return that is still open.

For an individual, the last qualifying FHL period is normally the tax year to 5 April 2025, and that return can usually be amended until 31 January 2027. For a company, it is the final FHL accounting period, with the amendment window running to 12 months after the statutory filing deadline. If that return is still open, a first-time pooling claim can still be made against the pre-abolition FHL activity, creating a pool that then carries forward. Once the amendment window closes, the first-time claim is effectively lost, because the activity that made the property a qualifying activity no longer exists and section 35 blocks opening a new pool on what is now a dwelling.

The mechanics of how such a pool then writes down and behaves on disposal are covered in depth on our post-April-2025 grandfathered pool page, which walks the Finance Act 2025 Schedule 5 transitional in full. The point to take from here is the deadline, not the derivation: if you never claimed, the practical question is whether your final FHL return is still amendable, and that is worth checking now rather than after the window shuts.

What happens to a claim you already made: the grandfathered pool

Owners who did claim on their FHL are in a more comfortable position. Finance Act 2025 Schedule 5 preserves the plant and machinery pool balances that existed on the FHL business at abolition. The unrelieved balance is carried into the corresponding ordinary property business pool and continues writing down under the normal rules, and it is specifically carved out of the section 35 dwelling-house restriction so that the historic claim does not unwind on the switch.

Two figures matter for the ongoing relief, and one of them has changed. The main pool writing-down rate has been reduced from 18 per cent to 14 per cent, taking effect from 1 April 2026 for corporation tax and 6 April 2026 for income tax, with a hybrid rate for any period straddling the change. The special-rate pool, which holds integral features such as heating, hot and cold water and general electrical systems, continues at 6 per cent. So a grandfathered FHL pool now writes down more slowly than it did before, but it does keep writing down. The relief is not lost; it simply runs off over more years.

The one point to watch is disposal. Selling the former holiday let while the grandfathered pool is still active brings a disposal value into the pool and can produce a balancing charge that recovers part of the relief already claimed. The arithmetic of that clawback, and the just and reasonable apportionment of the sale price to the fixtures, is set out on our balancing allowance and balancing charge page. It is enough to note here that a former FHL sale is not a clean exit for capital allowances purposes, and the pool position should be reviewed before contracts are exchanged.

New spending on the former holiday let gets nothing

For any expenditure incurred after abolition on a property that is now an ordinary residential holiday let, there is no plant and machinery capital allowance. Replacing the boiler, refitting the kitchen, upgrading the bathrooms: all of it is now spending on plant in a dwelling-house, and section 35 blocks the allowance in full. The grandfathering only protects the balances that already existed at abolition; it does nothing for fresh spend.

The only relief for that new spending is replacement of domestic items relief, which gives a revenue deduction for the cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant. It is worth understanding what that relief does not do. It is a revenue deduction, not a capital allowance, so it cannot be used to shelter a capital gain or to build a pool. It only covers replacements, so the first-time provision of an item never qualifies. And it does not touch the building fabric or integral features. For a former FHL owner used to pooling fixtures, it is a considerable step down, and it is the reason the retrospective claim window matters so much: it is the last chance to capture the plant on the capital allowances basis rather than the far thinner revenue basis.

Serviced and genuinely commercial units are a different question

Abolition removed the FHL carve-out, but it did not change the underlying test that section 35 turns on, which is whether the property is a dwelling-house. That distinction still does real work at the commercial end of the market.

A self-catering cottage let on short holiday lets is a dwelling, and it is now restricted like any other residential property. But accommodation that is genuinely commercial in character, such as an aparthotel, serviced apartments run with a hotel-style level of service, or a unit whose service provision makes the activity a trade rather than a property letting, may sit outside the dwelling-house restriction and continue to support a plant and machinery claim. The analysis is fact-sensitive and turns on how the accommodation is actually operated, not on what it is called. Owners of serviced units should not assume that abolition closed the capital allowances door in the same way it did for an ordinary holiday cottage; equally, they should not assume the door is open. It needs testing on the facts.

What a former FHL capital allowances review looks like

Because the remaining opportunities are narrow and timing-driven, a former FHL review is a focused exercise rather than a general tax health-check. It has three jobs: to establish whether a final FHL return is still open to amendment, to identify and value the qualifying plant and integral features embedded in the property through a surveyor-led apportionment, and to confirm whether any commercial or serviced element changes the section 35 position. That work needs a specialist capital allowances firm that runs fixtures claims, not a general accountant, because the valuation and the timing analysis are specialist tasks.

You can put a rough figure on the potential yourself before committing to anything. Qualifying plant and integral features in a well-equipped holiday cottage commonly run to 15 to 25 per cent of the original cost, so on a £500,000 cottage that is around £75,000 to £125,000 of qualifying expenditure. Our capital allowances calculator gives an indicative figure by building type, which is a useful starting point before a specialist confirms the real number and, crucially, whether the amendment window is still open to capture it. Most specialist firms work on a contingent basis, so an eligibility check costs you nothing up front, and the value at stake usually justifies the review well before the return closes.

This page reflects the position under Finance Act 2025 Schedule 5 and the capital allowances rules for 2026/27, including the reduced 14 per cent main pool writing-down rate. It covers the capital allowances consequences of FHL abolition only. The income tax, capital gains tax and pension effects of the change are dealt with on the related FHL abolition pages linked above.