MTD for Holiday Lets After the FHL Abolition

If you let a property on Airbnb, Booking.com, or through direct bookings, the biggest change affecting your tax position recently isn't Making Tax Digital itself, it's the change that happened just before it. This guide covers what that change means for your MTD obligations specifically, including a spousal twist that catches out couples who co-owned a holiday let together.

The FHL regime ended on 6 April 2025

The furnished holiday lettings (FHL) tax regime, the special rules that let qualifying holiday lets claim capital allowances, mortgage interest relief, and other benefits ordinary rentals couldn't, was abolished from 6 April 2025. If you'd been treating your holiday-let income as something separate and more favourably taxed than a conventional rental, that distinction is gone. From that date onward, holiday-let income is taxed exactly the same as any other rental property income, no special allowances, no separate category, no exemption for short-term or seasonal letting.

This wasn't a gradual phase-out. The change applied from a single fixed date, and it applied to every property that previously qualified as an FHL, regardless of how long you'd owned it or how consistently it met the old letting-days test. There's no transitional period where the old and new rules run side by side, and no grandfathering for properties that had claimed FHL benefits for years beforehand. If your accountant or your own spreadsheet is still working off pre-abolition assumptions, the numbers need revisiting now, not at your next tax return.

The knock-on effect for Making Tax Digital is direct. Holiday-let income is now ordinary property income, which means it counts toward your MTD qualifying income exactly like rent from a conventional buy-to-let. There's no separate, more generous threshold for former FHL properties, and no carve-out that keeps a small holiday let out of scope where a similarly-sized conventional let would be in scope. If you previously assumed FHL status kept you out of MTD's reach, or kept your holiday income in a mental bucket separate from your other lets, that assumption no longer holds, and it's worth checking your numbers again with that in mind before you assume you're safely under any threshold.

What changed in practice

With FHL income folded into ordinary qualifying income, work out your MTD position the same way any other landlord does: add your gross holiday-let income to any other qualifying income you personally receive, then compare the total against the thresholds. The first wave, £50,000, mandates MTD from 6 April 2026. We keep the complete three-wave table, with every date and the assessment-year logic behind it, in one place so it can't drift out of sync across pages, see MTD deadlines & thresholds for the full breakdown and to work out exactly which wave applies to you.

Record-keeping changes too, in a small but real way. Under the old FHL rules, some owners kept separate records to support capital allowance claims or to demonstrate the letting-days test the regime required. None of that applies any more. Your holiday-let income belongs in the same running digital record as everything else you let, gross rent received, letting platform fees, cleaning, repairs, and insurance, with no need for a separate FHL-specific ledger or a distinct set of categories for platform bookings versus direct enquiries.

A mixed letting pattern is common once FHL-specific record-keeping requirements stopped applying: some weeks booked through a platform, others let directly, and the occasional longer stay that wouldn't have met the old FHL letting-days test at all. None of that distinction matters any more for MTD purposes. Whichever route a booking came through, it's rental income, and it belongs in the same running digital total as everything else you let. You don't need separate spreadsheet tabs for platform income versus direct bookings, one consistent record covering the whole property is enough, and it's one less thing to reconcile every quarter.

The spousal 50/50 twist for ex-FHL couples

This is the part almost nobody has connected yet, and it's worth reading carefully if you co-own a holiday let with a spouse or civil partner. Married couples and civil partners who live together and jointly own property are automatically defaulted into a 50/50 split of that property's income for tax purposes, regardless of your actual ownership or contribution split, unless you file the right form to override it. Before 6 April 2025, that default explicitly did not apply to FHL income, FHL income was one of the specific exclusions, precisely because FHL was treated as a trading-style activity rather than ordinary rental income.

Now that the FHL regime has ended, that exclusion no longer has anything to bite on. Former FHL income is ordinary property income, and ordinary property income is exactly what the 50/50 default applies to. Married or civil-partner co-owners of a former FHL who actually split the income unevenly, say 70/30 to reflect who does the work managing bookings, may now find themselves defaulted into a 50/50 split for tax purposes unless they've filed Form 17 to declare their real beneficial ownership share. If that's your situation, it's worth checking sooner rather than later, both for your annual tax return and for how you divide your MTD qualifying income between you. We walk through the full Form 17 mechanic, with worked numeric examples, in our dedicated jointly owned property guide.

Record-keeping and what to do now

Once you're mandated, the ongoing obligation is the same for a former FHL as for any other let: four cumulative quarterly updates a year, plus one year-end final declaration. We cover the exact deadlines, the cumulative-update rule almost everyone gets wrong first time, and the downloadable calendar in our quarterly filing dates guide. The practical next step is the same regardless of how your holiday let was previously taxed, re-total your gross rental income including the former FHL property, work out your own share if it's jointly owned, and check the result against the current thresholds rather than relying on outdated FHL-era assumptions.

If Making Tax Digital for Income Tax is entirely new to you, start with what Making Tax Digital for Income Tax actually is. We're not yet listed on HMRC's software list, we'll update this page the moment that changes, but Landlord MTD Software is being built specifically against HMRC's published requirements. Join the waitlist below and we'll email you before your first deadline arrives.