Airbnb Tax in the UK for 2026/27: What Changed When the FHL Rules Ended

If you let a whole home on Airbnb in the UK, your tax rules changed on 6 April 2025 (1 April 2025 if the property is owned by a company). That's when the Furnished Holiday Lettings (FHL) regime ended. Since then, short-let profits are taxed in the same way as any other rental income: the same expense rules, mortgage interest relief only at the basic rate, no capital allowances on new furniture, and none of the old FHL capital gains reliefs. For 2026/27 there's one more thing to plan for: Making Tax Digital for Income Tax, which started in April 2026 for owners with qualifying income over £50,000.

We're Matt and Steph, and we've been hosting since we welcomed our first Airbnb guests in May 2017. We're property managers, not accountants or tax advisers, so this is our plain-English summary of what HMRC publishes, not advice about your own situation. For that, please speak to an accountant or a tax adviser, ideally one who works with landlords. Every GOV.UK and legislation page we link to below was checked in November 2026.

The short version

1. The FHL regime has gone. Your Airbnb income is now part of your ordinary property business.
2. Mortgage interest relief is restricted to the basic rate for individual owners.
3. No capital allowances on new furniture or fixtures. Existing pools carry on.
4. The pension and capital gains advantages have ended.
5. Day-to-day expenses are still deductible, including management and cleaning fees.
6. The £1,000 property allowance and Rent a Room rarely fit a whole-home short let.
7. Making Tax Digital applies from April 2026 above £50,000 of qualifying income, and from April 2027 above £30,000.
8. Airbnb and other platforms report hosts' earnings to HMRC.

What the FHL rules were

Under the old rules, a property counted as a furnished holiday let if it was available to let short term for 210 days and actually let for 105 days or more in the tax year, without long lets of over 31 days for significant periods. Qualifying lets got tax treatment much closer to a business than a buy-to-let.

HMRC's policy paper, Abolition of the furnished holiday lettings tax regime, sets out what changed (checked November 2026). The law itself is in section 25 and Schedule 5 of the Finance Act 2025 (checked November 2026). HMRC's own manual on the repeal, PIM4165, confirms the dates: tax years starting on or after 6 April 2025 for Income Tax and Capital Gains Tax, and 1 April 2025 for Corporation Tax (checked November 2026).

What changed when the FHL rules ended

Mortgage interest

FHL owners used to deduct loan interest in full. Now, if you own personally, the interest isn't deducted from your rental income and you get a tax reduction at the basic rate instead. HMRC's guide to working out your rental income confirms the restriction doesn't apply to companies (checked November 2026). For higher-rate taxpayers with a mortgage, this is often the change that costs the most.

Capital allowances

FHL businesses could claim capital allowances on furniture, white goods and fixtures. That has ended for new spending. HMRC's clarification on the abolition says capital allowances are no longer available on fixtures, furniture or furnishings, and replacement of domestic items relief is available on replacement items instead (checked November 2026).

Existing pools aren't lost. Where expenditure was in a pool by 5 April 2025, you can keep claiming writing down allowances until the pool is used up or you make a small pool claim. HMRC's Capital Allowances Manual at CA20025 explains that the balance moves across to the pool for your ongoing property business (checked November 2026). If you think you had qualifying spending before April 2025 that never made it into a claim, raise it with a tax adviser.

Pensions

FHL profits used to count as relevant UK earnings, which helped decide how much pension relief you could get. From April 2025 they don't.

Capital gains reliefs

The capital gains reliefs FHL owners relied on when selling have gone: business asset disposal relief, roll-over relief, gift relief, relief for loans to traders and the substantial shareholdings exemption for companies. The policy paper also describes an anti-forestalling rule from 6 March 2024, aimed at contracts used to lock in the old reliefs. If a sale is on the horizon, plan it with an adviser before you list the property.

Losses and joint owners

FHL losses used to be ring-fenced. Now your former holiday let joins your UK property business, and any FHL losses you were carrying forward can be set against its future profits. For married couples and civil partners who own a let jointly, PIM4165 says the normal rule applies from 6 April 2025: you're treated as sharing the income equally, unless you own the property in unequal shares and have elected to be taxed on those shares (checked November 2026).

How Airbnb income is taxed now

Your short let is simply part of your UK property business. If you also have a long-term let, the profits and losses of all your properties are added together. HMRC's clarification confirms that holiday lets remain property income, not a trade.

On GOV.UK's paying tax on rental income page, the first £1,000 of property income is tax-free. You contact HMRC if your property income is over £1,000 and up to £2,500, and you report it on a Self Assessment tax return if it's more than £2,500 after allowable expenses or £10,000 before them. If you don't usually send a tax return, you need to register by 5 October after the tax year you had the income (checked November 2026).

What expenses can you claim against Airbnb income?

HMRC's rental income guide lists the costs you can deduct, as long as they're wholly and exclusively for the letting (checked November 2026). For a short let, the ones that usually matter are:

• general maintenance and repairs (but not improvements)
• water rates, council tax, gas and electricity
• insurance, such as buildings, contents and public liability
• services, including the wages of cleaners
• letting agent fees and management fees
• accountant's fees
• ground rents and service charges
• direct costs such as phone calls, stationery and advertising

What you can't deduct: improvements, the cost of furnishing a property for the first time, and the capital part of your mortgage repayments. Replacement of domestic items relief covers like-for-like replacements once the old item is no longer available to guests. If the new item is an upgrade, you can only claim what an equivalent replacement would have cost.

Our own fee is 15% + VAT per booking (18% in total), and your monthly statement shows the fee and the VAT separately, which helps whoever does your accounts. You can see how that compares with other Manchester managers on our Airbnb management cost page.

The £1,000 property allowance and Rent a Room: why they rarely fit

The property allowance. GOV.UK's guide to tax-free allowances on property income says you can use the £1,000 allowance instead of deducting your actual expenses, not as well as them (checked November 2026). You also can't use it if you claim the tax reduction for mortgage interest. A whole home on Airbnb has cleaning, laundry, utilities, insurance and often a management fee, so its real expenses are usually far more than £1,000.

Rent a Room. The Rent a Room Scheme lets you earn up to £7,500 a year tax-free (£3,750 if you share the income) from furnished accommodation in your own home (checked November 2026). It's for resident landlords letting part of their only or main home, and GOV.UK says you can't use it for homes converted into separate flats. If the property you let on Airbnb isn't where you live, it doesn't apply.

VAT: the threshold, and the VAT on management fees

You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days, according to GOV.UK's VAT registration guidance (checked November 2026). HMRC's clarification also confirms that holiday accommodation remains standard-rated for VAT. How this applies to you depends on your turnover and how your lettings are set up, so ask your accountant.

The VAT you're most likely to see is on your management fee. Many managers, us included, charge VAT on top, so compare the total each would take from the same booking.

Making Tax Digital for Income Tax

This is the big change for 2026/27. HMRC's eligibility guidance sets out the timetable (checked November 2026):

• From 6 April 2026 if your qualifying income was over £50,000 in 2024/25
• From 6 April 2027 if it's over £30,000 in 2025/26
• From 6 April 2028 if it's over £20,000 in 2026/27

Qualifying income is your self-employment and property income before expenses, and joint owners count only their share, as HMRC's guide to working out qualifying income explains (checked November 2026). Because it's before expenses, a busy short let can cross the line sooner than you'd expect.

Once you're in, you keep digital records in compatible software and send quarterly updates by 7 August, 7 November, 7 February and 7 May, showing your income and expenses for the tax year so far (checked November 2026). Ask your accountant whether you're in scope and which software to use.

Airbnb and other platforms report to HMRC

Since 1 January 2024, platforms such as Airbnb collect information about their hosts each year and send it to HMRC by the following January, so the 2024 figures were due by 31 January 2025. That includes your name, date of birth, National Insurance number and the address of each property you rent out, and you should get a copy. GOV.UK's guide for people selling on digital platforms adds that being reported doesn't automatically mean you owe tax (checked November 2026). The UK rules are based on the OECD's Model Reporting Rules for Digital Platforms, published in July 2020, as HMRC's international manual explains (checked November 2026). In practice, HMRC can see what your listings earned, so make sure your return matches.

Council tax or business rates?

The FHL abolition didn't change this. In England, a self-catering property is assessed for business rates rather than council tax if it was available to let commercially for short periods (28 nights or less) for at least 140 nights in the last 12 months, was actually let for at least 70 nights, and will be available for at least 140 nights in the next 12 months (checked November 2026). Wales has higher thresholds of 252 and 182 nights.

What this means if you're deciding how to let

With the FHL advantages gone, a short let and a long-term tenancy are taxed in much the same way, so the choice comes down to earnings, costs and work. We've laid that out honestly in Airbnb vs long-term letting in Manchester.

If you'd like to talk through what your home could earn on short lets, get in touch through our contact form or call us on 07523 840 013. We'll tell you straight if a tenancy looks like the better fit.

Frequently asked questions

Do I have to pay tax on Airbnb income in the UK?

Usually, once your property income is above the £1,000 property allowance. GOV.UK says you contact HMRC if it's over £1,000 and up to £2,500, and you report it on a Self Assessment return if it's more than £2,500 after expenses or £10,000 before them. Since April 2025, short-let profits are taxed in the same way as other rental income.

When did the Furnished Holiday Lettings rules end?

They ended for Income Tax and Capital Gains Tax from 6 April 2025, and for Corporation Tax from 1 April 2025. The change is in section 25 and Schedule 5 of the Finance Act 2025. Your Airbnb income now forms part of your UK property business.

Can I still claim capital allowances on my holiday let?

Not on new spending on fixtures, furniture or furnishings. You can usually claim replacement of domestic items relief when you replace an item like for like. If you already had a capital allowance pool by 5 April 2025, you can keep claiming writing down allowances on it until it's used up.

Does Making Tax Digital apply to Airbnb hosts?

It does if your qualifying income is over the threshold: £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028. Qualifying income is your property and self-employment income before expenses, and joint owners count only their share. Once you're in, you keep digital records and send quarterly updates through compatible software.

Does Airbnb tell HMRC how much I earn?

Yes. Since 1 January 2024, platforms collect hosts' details and earnings each year and report them to HMRC by the following January, including the address of each property. Being reported doesn't automatically mean you owe tax, but HMRC will be able to compare it with your return.