Following the abolition of the Furnished Holiday Letting (FHL) regime on 6 April 2025, action may be needed by some joint FHL owners, who are married or in a civil partnership, to ensure that they continue to be taxed on the correct share of profits in the future.
Background
Under the Furnished Holiday Letting (FHL) rules, until 5 April 2025, income from an FHL property owned jointly by a married couple or civil partners could be split in whatever proportion the couple desired, without the need for unequal beneficial interests or an election.
Finance Act 2025 includes measures to abolish the FHL regime for tax purposes.
This abolition will have several Wide-ranging impacts. One of these is that from 6 April 2025, former FHL properties will no longer be excluded from the Jointly held property rules.
- This means that where an FHL property is held in the joint names of a married couple or civil partners, from 6 April 2025, the couple will be taxed 50:50 on the income arising by default, unless they hold unequal beneficial interests in the property and make a joint declaration of unequal beneficial interests to HMRC using Form 17.
Example
Paul and Helen, a married couple, own a qualifying FHL property in equal shares.
Profits have historically been split 90:10 in favour of Paul, a basic rate taxpayer, in recognition of him largely running the FHL business. Helen, a higher rate taxpayer, has other full-time employment.
As Paul and Helen are married, from 6 April 2025, profits from the business will be split 50:50 for Income Tax purposes by default, due to the abolition of the FHL regime. This means their overall Income Tax burden increases as more profits will be taxed on Helen.
- Paul and Helen could consider changing their ownership proportions of the property from 50:50, such that they have unequal beneficial interests.
- They could then jointly submit Form 17 to HMRC and be taxed on their respective shares.
Form 17: practical points
A Form 17 declaration can only be made if the individuals are beneficially entitled to the income in unequal shares (e.g. 60:40, 90:10, etc). A declaration cannot be made where a married couple or civil partners own property as beneficial Joint tenants.
Form 17 does not change the ownership split; it merely confirms to HMRC that the property is not owned 50:50 and that the couple wish to be taxed according to their underlying beneficial ownership.
A Form 17 declaration:
- Must be made jointly.
- Must be submitted to (and received by) HMRC within 60 days of being completed; otherwise, it is invalid.
- Takes effect from the date the declaration was signed by the last spouse or civil partner to sign it.
- Cannot be backdated: only income that arises after the date of the Form 17 declaration is covered.
Evidence of unequal beneficial ownership should be submitted with the Form 17 declaration. This is likely to be in the form of a declaration or deed of trust.
Legal advice should be sought before changing the capital ownership split of property. The wider tax implications should also be considered, including:
Useful guides on this topic
Furnished Holiday Letting (FHL): Abolition of the regime briefing
The Furnished Holiday Letting (FHL) regime was abolished in April 2025. We consider the practical impact of losing the FHL rules and provide some essential planning points.
Furnished Holiday Letting (FHL)
What is Furnished Holiday Letting? How do you qualify for Furnished Holiday Letting? What are the rules for Furnished Holiday Letting?
Joint property elections
When a property is held in joint names it is mainly taxed according to beneficial ownership. There is an exception where married couples and civil partnerships hold joint property. Trusts are also taxed differently.
Joint property: Legal v beneficial ownership
What is the difference between legal and beneficial ownership? What are the tax consequences? Are the rules different for married couples and civil partners?
