Capital Gains Tax on Holiday Lets: Rates, Deductions, and Reporting

If you sell a holiday let in the UK, capital gains tax on holiday lets is now charged at the same rates as any other residential property: 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. The Furnished Holiday Let regime that once gave these properties access to business reliefs ended on 6 April 2025.¹ A narrow transitional route to Business Asset Disposal Relief still exists for owners whose FHL business ceased before that date, but for everyone else the calculation is now the same as selling a buy-to-let.

The Rates You Will Pay

From 6 April 2025, gains on holiday lets fall under the standard residential CGT rates:²

18% on any part of the gain that falls within your unused basic rate band
24% on any part that falls into higher or additional rate territory

Which rate applies depends on your total taxable income for the year. The gain sits on top of your other income. If your income plus the gain stays within the basic rate band, you pay 18% on the whole gain. If it crosses into higher rate territory, the portion above the threshold is taxed at 24%. A sizeable property gain will often push a modest earner into the higher band on its own.

Every individual also gets an annual exempt amount. For 2025/26 that allowance is £3,000.² Joint owners each have their own £3,000. It is a small deduction against a typical property gain, but worth claiming.

One point catches sellers out. If you owned the property before and after April 2025, the entire gain is taxed at the rates in force on the date you sell. There is no split that taxes the pre-2025 portion at the old business rates. The disposal date sets the rate.

Transitional Relief If Your FHL Business Ceased Before April 2025

The abolition kept a limited door open. If your Furnished Holiday Let business ceased before 6 April 2025, Business Asset Disposal Relief may still apply to a sale that completes within the normal three-year window after cessation.¹ Someone who wound down before April 2025 could therefore still sell by early 2028 and claim the relief.

The relief is worth less than it used to be. The BADR rate rose to 14% from 6 April 2025 and is scheduled to rise again to 18% from 6 April 2026.³ For a higher rate taxpayer, that still saves six percentage points against the standard 24%. For a basic rate taxpayer paying 18% anyway, the relief adds nothing from April 2026 onward.

There is also an anti-forestalling rule to be aware of. If you entered into an unconditional contract on or after 6 March 2024 and completion falls on or after 6 April 2025, you cannot claim rollover relief, gift hold-over relief, or Business Asset Disposal Relief unless specific conditions confirming a genuine pre-existing arrangement are met.⁴ The rule exists to stop paper contracts being used to lock in the old reliefs.

Deductions That Reduce the Gain

HMRC taxes the gain, not the sale price. The gain is the sale price less the purchase price, less allowable costs. With the business reliefs gone, getting the deductions right is where real savings sit.

Buying and Selling Costs

You can deduct costs directly linked to acquiring and disposing of the property: solicitors’ fees on the original purchase, Stamp Duty Land Tax paid at acquisition, estate agents’ commission on the sale, and conveyancing fees on disposal.⁵

Capital Improvements

Money spent improving the property also reduces the gain. Extensions, a new bathroom, a loft conversion, or rewiring all qualify because they enhance the property beyond its original condition. Routine maintenance and redecoration do not, however expensive.⁵ The line between improvement and repair matters. Replacing a broken boiler with a like-for-like model is a repair. Fitting a higher-specification system as part of a wider upgrade may qualify as an improvement. Keep the invoices. HMRC will not accept estimates.

What You Cannot Deduct

You cannot deduct mortgage interest, and you cannot deduct the running costs you may have claimed against rental income while you owned the property, such as insurance, utilities, or cleaning. Those belong to the income tax calculation, not the CGT one.

Reporting and Paying Within 60 Days

You must report the gain and pay the tax within 60 days of the completion date, not the exchange date.⁶ The window is short and takes people by surprise, because most other taxes work on the annual self-assessment cycle.

Filing is done through the Capital Gains Tax on UK property account on GOV.UK. You will need the property address, acquisition and disposal dates, the purchase and sale prices, and details of any deductible costs or reliefs.⁶ Payment goes through the same service. Keep the submission receipt and transaction reference; the gain also has to be reported on your self-assessment return for the year.

Penalties

Missing the 60-day deadline triggers an automatic £100 fixed penalty. After six months, HMRC charges the greater of £300 or 5% of the tax due. The same additional charge applies again at 12 months. Interest runs on unpaid tax from the day after the deadline. HMRC does not send a reminder before the penalty lands, so put the date in the diary at exchange, not completion. Gathering your cost records before exchange rather than scrambling afterwards is what makes the deadline manageable.

Reducing the Bill Now That the Business Reliefs Are Gone

The toolkit is smaller, but a few things still help. Timing a sale to fall in a tax year when your other income is lower keeps more of the gain in the basic rate band. Transferring a share to a spouse or civil partner before sale is itself a tax-free disposal between spouses, and it doubles up the annual exempt amount and the basic rate band available against the gain. If you own more than one property, staggering sales across tax years stops a single large gain pushing the whole amount into the higher rate.

Rollover relief is no longer available for holiday lets, so reinvesting the proceeds into another rental property will not defer the gain. The one remaining deferral route for a property gain is investment into qualifying Enterprise Investment Scheme shares, which carries its own risks and conditions that have nothing to do with property. For most sellers the picture is now plain: work out the gain, deduct what you can properly evidence, and pay within 60 days.