Furnished Holiday Let Tax Reliefs Are Ending – What This Means for Scottish Landlords
From April 2025, the tax landscape for holiday rental property owners in Scotland is changing dramatically.
The UK Government is abolishing long-standing tax advantages for Furnished Holiday Lets—bringing them in line with traditional buy-to-lets. While Westminster argues this levels the playing field, landlords and tourism operators are warning of higher costs, reduced supply, and less incentive to invest.
If you own or are considering buying a holiday let in Scotland—whether in the Highlands, the Borders, or here in Glasgow—here’s what you need to know.
What’s Changing from April 2025?
Until now, Furnished Holiday Lets have benefited from tax rules normally reserved for trading businesses. That’s about to end.
Here’s how the main tax advantages are being removed:
| Relief | Before April 2025 | From April 2025 |
|---|---|---|
| Mortgage Interest | 100% deductible against rental income | Capped at a 20% tax credit |
| Capital Gains Tax on Sale | 10% (via Business Asset Disposal Relief) | 18% or 28% based on income |
| Rates / Council Tax | Business rates (with 100% relief in many cases) | Likely subject to full council tax |
| Furniture & Fixtures (Capital Allowances) | Full relief on fittings and equipment | Only replacement relief (like-for-like items) |
🧾 How Will This Affect Glasgow-Based Landlords?
Glasgow isn’t a traditional tourist destination like Skye or Inverness—but it still has a thriving short-term rental market. Many landlords let out flats near the West End, city centre, or SECC on Airbnb or Booking.com.
If you’re one of them, here’s what you need to think about:
💰 1. Higher Tax Bills on Rental Profits
You’ll no longer be able to offset 100% of mortgage interest against income. That’s a big change, especially if you’re a higher-rate taxpayer.
🏠 2. Less Tax Relief When You Sell
If you’ve owned your property as a holiday let and were banking on Business Asset Disposal Relief, the CGT rate hike could cost you thousands when you sell.
🧾 3. Business Rates Switching to Council Tax
Most Glasgow FHLs won’t qualify for business rates anymore—meaning you’ll now pay council tax, and possibly double under local second-home rules if they’re introduced here as in other parts of Scotland.
🛠️ 4. Less Relief on Fit-Out Costs
Currently, kitting out a holiday let with beds, white goods, and furniture is tax-deductible via capital allowances. After April 2025, only like-for-like replacements will be deductible—cutting another advantage.
Why Is the Government Making These Changes?
The Treasury says it’s about fairness and housing availability. Ministers argue that FHL owners have enjoyed an unjustified tax advantage over traditional landlords and hoteliers—especially in places with housing shortages.
They also hope to encourage some landlords to return their properties to the long-term rental market, easing pressure in popular locations like Edinburgh, the Highlands, and coastal towns.
Will This Affect Tourism in Scotland?
Tourism industry groups believe so. Self-catering accommodation is a critical part of Scotland’s visitor economy, especially outside the big cities.
Concerns include:
- Fewer holiday lets: Some landlords may exit the market, reducing availability
- Higher nightly rates: Remaining operators may increase prices to cover tax costs
- Knock-on effect: Fewer bookings could impact local businesses (shops, cafés, attractions) reliant on tourist footfall
Even in Glasgow, events like COP26, TRNSMT, and the World Pipe Band Championships attract huge demand for short-term stays—demand that hotels alone can’t always meet.
How Much More Tax Are We Talking?
Here’s a simplified example for a higher-rate taxpayer:
- £20,000 rental profit
- £10,000 mortgage interest
Before April 2025:
- Deduct full mortgage interest → taxable income = £10,000
- Tax = £4,000 (40%)
After April 2025:
- No deduction—full £20,000 taxed
- Get 20% credit on £10,000 interest = £2,000
- Tax = £8,000 – £2,000 = £6,000
- ✅ £2,000 extra tax
Multiply that over several properties or peak years, and the difference grows fast.
What Should Holiday Let Owners Do Now?
If you operate a short-term rental in Glasgow or elsewhere in Scotland, you have three main options:
🔍 1. Review Your Business Model
Can your nightly rates absorb the new tax burden? If not, do you need to scale back, restructure, or pivot?
🏡 2. Consider Switching to Long-Term Letting
It’s simpler, predictable, and still in demand—especially in Glasgow’s city centre, West End, or student-heavy areas.
📦 3. Sell Before April 2025
If you were planning to exit anyway, selling now may reduce your CGT bill by thousands—if you still qualify for 10% relief under current rules.
How I Can Help
At Glasgow Accountants, I work with landlords, investors, and small accommodation providers across the city to:
- Model tax impact under the new rules
- Compare FHL vs buy-to-let strategies
- Calculate potential CGT exposure
- Help with restructuring, exit planning, or switching to long-term rental
Final Thoughts
The end of FHL tax perks is a major shift, not a minor tweak. If you rely on your holiday let income—or were planning to invest in short-term rentals—these changes could significantly impact your strategy.
Let’s talk it through before April 2025 arrives.
👉 Contact Glasgow Accountants – Personalised support for property owners navigating Scotland’s changing tax rules.