MTD for holiday-let landlords: the rules after FHL abolition

There’s a woman I’ll call Sarah, though she’s really a composite of about four landlords whose forum threads I ended up deep in. Cottage near Whitby, lets it to holidaymakers spring through autumn. She’s also got a flat in Leeds on a normal tenancy. Bear with the two properties, because the whole point of her is that she got hit by two separate tax changes twelve months apart, and the second one lands differently depending on what the first one did to her.

Quick version of the first change, since you’ve probably half-heard it. The Furnished Holiday Lettings regime ended on 6 April 2025. For years a holiday let got taxed more kindly than a normal rental. That stopped.

What people get wrong is assuming the cottage stopped being a business overnight. It didn’t. HMRC said this outright: repeal doesn’t mean the business ceased, it just turns off the perks. So Sarah’s cottage now gets taxed like the Leeds flat. Plain property income, nothing special about it.

What actually changed when FHL ended

The bits that changed are worth going through, because a couple of them come back when we get to software, and one of them is the sort of thing that quietly ambushes married couples.

Capital allowances first. Buy a new sofa for the cottage today, get nothing back for it. Used to be, furniture and kit for a holiday let earned you capital allowances. Now it’s the same replacement-of-domestic-items rule every landlord already lives with, and that only pays out when you replace something, never the first time you buy it. There’s a wrinkle though. If she had a capital allowances pool already ticking over from before the cutoff, she keeps drawing that down until it runs dry. Hold that thought, it comes back when we talk about which software to pick.

Then the losses thing, which is the one bit of good news in the whole mess. Old FHL losses used to be stuck to that one holiday let. Couldn’t touch anything else. Now they’re not stuck. A bad summer at the cottage in 2023 can knock down the tax on her Leeds rent in 2026. You won’t see this advertised anywhere, and honestly I nearly skipped past it myself when reading the rules, but if your holiday let’s had a rough patch it’s real money back.

Now the couples one. This is the one I’d circle in red. When Sarah and her husband owned the cottage together under the old rules, they split the income however suited them. From April 2025, a jointly-owned property between spouses defaults to 50:50, full stop, unless you send HMRC a Form 17 proving you actually own it in different shares. Loads of couples haven’t noticed this happened. And it’s not just paperwork; it changes whose name the income sits under, and that can quietly decide which of them gets pulled into digital filing at all. More on that in a second, because for Sarah it genuinely matters.

Two smaller ones, quickly. Holiday-let profit used to count towards how much you could pay into a pension with tax relief. Gone. And the capital gains breaks that made selling a holiday let cheaper than selling a buy-to-let, also gone from April 2025, with rules written specifically to catch anyone who tried to rush a sale through early to dodge the change. If Sarah’s thinking of selling, that’s an accountant conversation, not something a comparison site should pretend to answer.

Where that leaves Sarah with digital filing

Making Tax Digital runs off your gross qualifying income. That’s your rent plus any self-employment turnover, added together, before a single expense comes off. Whether Sarah got dragged in from April 2026 was decided by the return she filed by 31 January 2026, the one covering 2024/25. The bar drops from £50,000 to £30,000 in April 2027, then to £20,000 in April 2028. So anyone sitting under the line today isn’t off the hook. Just further back in the queue.

Two things specific to former holiday-let owners change the maths. Holiday-let income was always property income for this test, so the regime ending didn’t nudge Sarah any closer to the threshold on its own. But that new 50:50 default can. Picture a couple where one partner used to take 80% of £60,000 of cottage income. Split evenly now, they’re each treated as getting £30,000, which might keep both under today’s threshold, or tip a second person over a future one. The way you split income isn’t a bookkeeping nicety anymore. It’s a switch that can turn the whole obligation on or off.

Once you’re in, the shape of it is four updates a year plus a final declaration. The updates are cumulative, which means each one restates the whole year so far rather than just the latest three months. The upside of that: a mistake in your first quarter gets fixed in the second, not carried all the way to January like a stone in your shoe. Here are the dates if you stick with standard tax-year quarters.

You can pick calendar quarters instead, where the periods start on the 1st, but only before your first submission. No switching partway through the year. And a word on the “soft landing” everyone keeps mentioning. Yes, HMRC won’t hand out penalty points for late quarterly updates in 2026/27. But the final declaration for that year, due 31 January 2028, carries the normal late-filing penalties. And you can’t file that declaration until all four updates exist. So skipping quarters was never really on the table.

If Sarah owns the cottage jointly, there’s a concession she should actually use. Joint owners can report just their share of income each quarter and deal with their share of expenses once a year, either by amending the fourth update or at the final declaration. No form to fill in, no opting in, and it works whether or not her husband is in MTD himself. The catch: it covers jointly owned property only. Anything in her sole name still needs full quarterly records.

One more thing that trips up people with a place abroad. UK property and overseas property count as two separate income sources under MTD, each with its own quarterly update stream. So a former holiday let in, say, Spain now sits in her overseas property business. Two streams, two sets of submissions, one shared deadline.

What all this means for picking software

Here’s where most comparison sites get it wrong. They still list “FHL support” as a software feature, as if it’s a live tax category. It isn’t, not for this year’s filing. What a former holiday-let owner actually needs is more specific, and it’s worth being honest about how few tools hit all of it.

Start with the legacy stuff. That capital allowances pool she’s still drawing down, and the old FHL losses now offsetting her wider property business, need a sensible home in whatever she picks. Then there’s per-property tracking, which matters more than it sounds. Holiday lets earn in bursts, high summer then dead winter, so lumping the cottage’s income in with the Leeds flat’s steady rent hides which one’s actually paying its way. If the 50:50 rule or the quarterly easement applies to her, the software also has to report her share, not the whole property, and plenty of the cheaper tools just can’t. And if she picks up freelance work on top, it needs to file property and self-employment as two separate quarterly streams, which is the requirement that quietly knocks out half the market.

That last one is the killer. Among the tools in our comparison, the landlord specialists handle property beautifully and self-employment not at all, while the sole-trader apps mostly treat multiple properties as a bolt-on. Something that genuinely does both well is rarer than the marketing lets on. In practice it pushes you towards a full accounting platform, or towards bridging software sitting on top of a spreadsheet you already trust, which for a lot of ex-FHL owners with years of workbook history is the gentler move anyway. And there’s a third option nobody likes to say out loud: run two cheaper tools side by side, one per income stream, and stop trying to force one app to do everything.

Which of those routes is right for you comes down to how many properties you’ve got, who owns what, and whether a trade sits alongside the lets. Which is exactly what the selector is for.

Questions ex-FHL owners keep asking

My last FHL year was 2024/25. Does that push back when digital filing starts for me?

No, and this one feels like it should, which is why people get caught. Whether you’re mandated from April 2026 comes down to the gross income on that same 2024/25 return, FHL pages and all. The regime ending and digital filing starting are just two clocks ticking side by side.

Do I still need software with an FHL setting?

Not for this year’s reporting. From 2025/26 on it’s all one property business, so a dedicated FHL module isn’t the thing to hunt for. What you do need is somewhere to carry the history: the capital allowances pool you’re still running down, and any losses brought forward. A tool that lets you tag or note those against the property does the job.

We own the cottage 50:50. Do we both have to file?

Each of you gets measured against the threshold on your own share. If you’re both over it, you both file. But the joint-property easement means each of you can send income-only quarterly updates for the shared cottage and settle expenses once a year, which in practice lets one of you keep the detailed books the way one partner usually already does.