Short-term letting in Bath remains highly attractive thanks to the city’s historic architecture, strong tourism demand, and premium rental potential. But for hosts, understanding how tax law has changed is now more important than ever. With the abolition of the Furnished Holiday Let (FHL) regime coming into effect in April 2025, the way you deduct expenses—and how you plan your investments—could have a big financial impact.

This post explains exactly what you can deduct after the changes, what’s more restricted, and how to optimise your short-let business in Bath going forward.

What Expenses Can You Still Deduct?

Even after the FHL regime ends, many of your “revenue” or operating costs remain fully deductible, provided they’re wholly and exclusively for the business. According to HMRC:

• Running Costs: Utilities (electricity, water, broadband), cleaning, consumables, and repair/maintenance costs remain deductible.

• Professional Fees: Accountancy, tax advice, and platform or letting-agent fees still count as allowable expenses.

What has changed significantly:

1. Mortgage / Finance Costs

• From 6 April 2025, mortgage interest (and other finance costs) for short-let properties will be restricted to basic-rate relief (20%) for individual landlords, like other residential landlords.

• This is a big shift: under FHL rules, landlords could deduct full mortgage interest.

2. Capital Expenditure / Allowances

• New capital allowances on things like furniture, fixtures, and plant will no longer be available after the repeal.

• Instead, you’ll use Replacement of Domestic Items Relief to claim for like-for-like replacements (e.g., replacing a sofa), but you cannot claim for brand-new items in the same way that capital allowances allowed under FHL.

• If you already have an existing capital allowances pool (from before April 2025), you can continue to claim writing-down allowances on that pool until it’s fully used.

3. Capital Gains Tax (CGT) / Disposals

• The special FHL treatment for CGT (e.g., Business Asset Disposal Relief) is being removed from 6 April 2025.

• There’s an anti-forestalling rule: if you enter an unconditional contract on or after 6 March 2024 and complete the sale on or after 6 April 2025, you may not qualify for rollover relief, BADR, or other FHL CGT reliefs—unless certain conditions are met.

• For joint owners (e.g. spouses), unless a Form 17 election is made, from 6 April 2025, profits and losses are deemed split 50:50.

4. Pension Contributions

• FHL profits will no longer count as “relevant UK earnings” for pension‑contribution purposes from April 2025, limiting some of the contributions-based tax planning that was possible under the old regime.

Important Nuances & Planning Considerations

Because of how big these changes are, hosts should be very careful in how they plan for them:

• Timing of Capital Expenditure: If you’re planning to buy or refurbish furniture, appliances, or fixtures, doing so before 5 April 2025 could allow you to benefit from existing capital allowance pools.

• Replacement vs New Purchases: Replacement relief is more restrictive than capital allowances used to be. According to tax specialists, some kinds of “fixtures” (like built-in heating systems or bathrooms) might not qualify for replacement relief.

• Record‑Keeping Is Critical: To take advantage of writing-down allowances on existing pools, you need tight records of what capital expenditure has already been claimed.

• Joint Ownership Strategy: If you own a property with someone else and your ownership shares differ, consider submitting Form 17 before the 2025/26 tax year to avoid being taxed on a 50:50 split.

• Selling Strategy: If you plan to sell, be very careful about how and when you contract the sale. Anti-forestalling rules can block CGT relief.

• Get Professional Advice: These changes are complex. It’s wise to consult a tax advisor who understands holiday-let tax, especially to plan transition, capital spending, and exit.

FAQs

Q1: Can I still claim cleaning, utilities, and upkeep costs after April 2025?
Yes. According to HMRC, these general, recurring expenses (revenue costs) remain deductible.

Q2: Will my mortgage interest deduction be completely lost?
No—but it’s reduced. After April 2025, you’ll get 20% relief on finance costs, not full deduction.

Q3: What happens if I replace my sofa or other furniture after the change?
You may be able to use Replacement of Domestic Items Relief, but only for like-for-like replacement. Brand-new, first-time purchases may not qualify.

Q4: Can I still use my old capital allowance “pool”?
Yes. If you bought eligible items before 5 April 2025, the “pool” remains, and you can continue claiming writing-down allowances.

Q5: What about CGT when I sell the property after April 2025?
The special FHL CGT reliefs (like Business Asset Disposal Relief) mostly go away. Also watch the anti-forestalling rule—it restricts use of CGT reliefs if the sale contract is made after 6 March 2024.

Q6: How does this affect pension contributions?
FHL income will no longer count as “relevant UK earnings” for pension purposes from April 2025, which could reduce your ability to make certain pension contributions.

Conclusion

The tax landscape for short-let (holiday) lets in Bath is changing in a big way. With the abolition of the FHL regime in April 2025, hosts must rethink how they invest in their properties, track their expenses, and plan for future sales.

• While many running costs remain deductible, the big tax benefits around mortgage interest and capital allowances are being dramatically scaled back.

• Strategic timing—especially for capital spending—is more important than ever.

• For joint owners, tax treatment may change unless you take action.

• Most importantly: getting specialist accounting advice is now essential for any serious short-let host.

If you’d rather not handle all of this yourself, working with a professional short-let management company like Pass the Keys can make a huge difference. They can help with: guest management, cleaning, maintenance—and crucially, reporting and record-keeping in a way that supports your tax strategy.