From 6 April 2025, a jointly owned holiday let is taxed as ordinary UK property income, which changes how co-owners divide the profit and what they can deduct. The Finance Act 2025 abolished the Furnished Holiday Lettings regime, and with it went the flexibility married couples had to split holiday let income in whatever ratio suited them, along with full mortgage interest deduction, capital allowances on new furnishings, and the capital gains reliefs that used to apply on sale. The joint ownership tax rules for holiday lets after FHL abolition are now the same rules that govern any other jointly held residential rental in the UK.
How Joint Income Is Now Split
The split depends entirely on whether the co-owners are married or in a civil partnership.
Spouses and Civil Partners
Under Section 836 of the Income Tax Act 2007, rental income from property held jointly by spouses or civil partners who live together is automatically treated as split 50/50, regardless of the actual ownership percentages. The former FHL rules carved out an exception that let couples allocate profits in any ratio they chose. The Finance Act 2025 removed that exception.1Legislation.gov.uk. Income Tax Act 2007, Section 836
Couples who own a holiday let jointly are now locked into the 50/50 split unless they file Form 17 (Declaration of Beneficial Interests in Joint Property and Income) with HMRC. Form 17 shifts the tax split to match the actual beneficial ownership, but only if the beneficial interests genuinely are unequal. You cannot use it to allocate income in a ratio you prefer. Evidence of the unequal beneficial interest, such as a deed of trust or a declaration recorded by a solicitor, has to sit behind the form.2GOV.UK. Declare Beneficial Interests in Joint Property and Income
Before the abolition, a 90/10 election was a paperwork exercise. Now, moving income onto a lower-earning spouse requires a genuine legal change to how the property is held. The personal allowance is still £12,570 for the current tax year, so structuring ownership to keep more income below the higher-rate threshold remains worthwhile, but the route runs through property law rather than a tax election.3GOV.UK. Income Tax Rates and Allowances for Current and Previous Tax Years
Unmarried Co-owners
Section 836 does not apply to unmarried co-owners, whether friends, siblings, or business partners. HMRC expects income to be reported in line with each person’s actual beneficial interest in the property. Two people who own a cottage 60/40 report 60% and 40% of the net profit.4GOV.UK. PIM1035 – Introduction: Jointly Owned Property and Partnerships
Co-owners can agree a different division of profits and losses than their ownership shares, and HMRC will accept it if the agreement is genuine. A written partnership agreement or deed of trust is the cleanest way to document that. Without one, HMRC will default to the shares shown on the legal title. If one co-owner contributed 75% of the purchase price but the title is held 50/50, the tax split follows the title unless a separate agreement says otherwise.
Unmarried co-owners were never subject to the 50/50 default, so on the income-splitting front the abolition changes little for them. The deduction losses below affect them the same as everyone else.
What Each Co-owner Loses on Deductions and Reliefs
Four benefits disappeared with the FHL regime, and each one applies to every co-owner’s share of the property.5GOV.UK. Abolition of the Furnished Holiday Lettings Tax Regime
Mortgage interest is the big one. Under the FHL rules, holiday let owners could deduct the full cost of mortgage interest from rental income before calculating tax. From 2025-26, the finance cost restriction applies: relief is limited to a basic rate (20%) tax credit. For a basic-rate taxpayer the arithmetic works out much the same, but for higher-rate and additional-rate taxpayers the effective relief drops significantly. If both spouses are higher-rate taxpayers jointly funding a mortgage, this is the change most likely to lift the joint tax bill.
Capital allowances on furniture, equipment, and fixtures have also gone for new expenditure. New spending qualifies only for replacement of domestic items relief, which covers the cost of replacing existing items like beds, sofas, and kitchen appliances on a like-for-like basis. It does not cover the initial cost of furnishing a property.
Capital gains reliefs available on qualifying FHL disposals, including Business Asset Disposal Relief, rollover relief, gift holdover relief, and relief for loans to traders, no longer apply to holiday let sales from 2025-26 onward. And FHL profits no longer count as relevant UK earnings for calculating the maximum tax-relievable pension contribution, which can reduce the pension contributions some owners were making tax-efficiently.
Ordinary running costs remain deductible against rental income in the usual way: insurance premiums, cleaning and laundry, utilities, letting agent fees, advertising, and routine maintenance and repairs. Each co-owner deducts their proportionate share based on the agreed income split.
Transitional Protections Carried Into Each Owner’s Share
Owners who ran a qualifying FHL business before April 2025 keep several protections that follow their ownership proportion into the new regime. These still show up on returns filed in 2026 and later.5GOV.UK. Abolition of the Furnished Holiday Lettings Tax Regime
Unused losses from the former FHL business can be carried forward and set against future profits from the owner’s UK or overseas property business. The losses are no longer ringfenced to FHL income, which is actually more flexible than the old rule. If you held 60% of the FHL business, 60% of the carried-forward loss pool is yours.
Where the FHL business had an ongoing capital allowances pool before abolition, owners can continue to claim writing-down allowances on that existing pool. Only new expenditure falls under the replacement of domestic items rules.
Business Asset Disposal Relief may still apply to a disposal where the FHL conditions were met before abolition, the business ceased before the April 2025 commencement date, and the disposal falls within the normal three-year window following cessation. Records from the final FHL tax year are worth keeping, because they are what substantiate these claims on future returns.
Filing and Reporting for Co-owners
There is no joint return for co-owned property in the UK. Each owner files their own Self Assessment return, reporting their share of receipts and expenses on the SA105 supplementary pages that attach to the SA100.6HM Revenue & Customs. Self Assessment: UK Property (SA105) Holiday let income now goes in the standard property income boxes; the separate FHL section on earlier versions of the form is gone.
Confirm the split before starting the return. Married couples need to know whether they are on the 50/50 default or have a Form 17 in place. Unmarried co-owners should have their agreed split documented in writing.
Paper returns are due by 31 October following the end of the tax year; online returns by 31 January. Any tax owed is due by 31 January regardless of filing method.7GOV.UK. Self Assessment Tax Returns: Deadlines Each co-owner is individually responsible for their own return and their own bill. If one files late, the other is unaffected, but penalties on the late filer start at £100 immediately, add daily penalties of £10 (up to £900) after three months, and add further tax-geared penalties at six and twelve months.8GOV.UK. Self Assessment Tax Returns: Penalties Interest also runs daily on any unpaid tax.
One boundary worth noting: the former FHL occupancy thresholds no longer matter for tax classification. They may still bear on business rates or planning permission in some local authorities, but for income tax purposes the property is simply a rental, whatever its letting pattern looks like.