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

Sarah is fictional, but she is the kind of holiday let owner this guide is really for. She has a cottage near Whitby, let to holidaymakers from spring through autumn. There is also a flat in Leeds on a normal tenancy. Two tax changes arrived twelve months apart. The first changed how the cottage joined her wider property business; the second uses the resulting gross property income to decide when digital reporting begins.

The Furnished Holiday Lettings regime ended for Income Tax on 6 April 2025. Former holiday lets now sit inside the ordinary UK or overseas property business instead of receiving a separate set of reliefs.

The repeal did not, by itself, treat Sarah as though the letting activity had ceased. The cottage remains property income, but the special FHL treatment has gone. That distinction preserves some transitional history while changing how new expenditure and future profits are handled.

The FHL regime ending changed the order of the problem

Several of the changes continue to affect the records Sarah needs, and the joint-ownership rule can also change how much income each spouse reports.

The first check is capital allowances. Before the repeal, qualifying furniture and equipment in an FHL could attract capital allowances. New purchases now follow the ordinary property-business rules, which means relief for replacing a domestic item may be available but the initial cost of furnishing the cottage usually is not. A capital allowances pool carried forward from the old FHL business can still be used under the transitional rules, so Sarah needs to keep that balance identifiable in her records.

Brought-forward FHL losses also move into the relevant wider property business. A loss carried from the former UK FHL business can therefore be used against later profits of the UK property business, subject to the transitional rules. The amount and its origin still need to be preserved in the records rather than absorbed into one unexplained balance.

Joint ownership needs a separate check. When Sarah and her husband owned the cottage together under the old rules, they could agree a profit split without the ordinary married-couple 50:50 rule applying. From April 2025, a jointly owned property between spouses defaults to 50:50 unless they send HMRC a Form 17 showing that the beneficial ownership and income are held in different shares. The tax split affects each spouse’s qualifying property income, so it can also affect their separate MTD start dates.

Two other changes may matter outside the quarterly-reporting work. Former FHL profits no longer count as relevant UK earnings for pension contribution relief, and the FHL-specific Capital Gains Tax reliefs ended with anti-forestalling rules around earlier arrangements. If Sarah is considering a sale or relying on an agreement made before the repeal, she should ask a tax adviser to review the facts and dates.

Sarah’s digital-filing position follows from the old FHL year

Making Tax Digital runs off your gross qualifying income. That’s your rent plus any self-employment turnover, added together, before expenses. Whether Sarah had to start in April 2026 was decided by the qualifying income on her 2024/25 return. The bar drops from £50,000 to £30,000 in April 2027, then to £20,000 in April 2028. Someone below the first threshold should therefore check the later tests rather than treating April 2026 as the only start date.

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. That may leave both below the 2026 threshold while placing each of them at the 2027 threshold. Because HMRC tests each person separately and the rule applies only when income is more than the threshold, the actual ownership and profit split needs to be checked rather than estimated.

Once you’re required to use MTD, you keep digital records, send four updates during the year and then submit your tax return. The updates arecumulative, which means each one restates the whole year so far rather than just the latest three months. A correction made during the year is reflected in a later cumulative update instead of waiting until the tax return. 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; you cannot switch partway through the year. HMRC will not issue late-submission points for quarterly updates in 2026/27. The tax return for that year is still due by 31 January 2028 and remains subject to the normal late-filing rules. All four quarterly updates must also be sent before the return.

If Sarah owns the cottage jointly, a simplification may reduce the quarterly detail. Joint owners can report just their share of income in each update and leave their share of expenses until after the tax year. If Sarah uses that option, she records the expenses by resending her fourth update before submitting her tax return. The simplification applies only to jointly let property; a property in her sole name still needs income and expenses recorded during the year.

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.

The software choice needs to cover both the legacy detail and the new property rules

A current software comparison should no longer treat “FHL support” as a live tax category for new records. A former FHL owner instead needs the ordinary property reporting features together with a clear place for transitional pools, losses and ownership shares.

The legacy pieces come first. 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 is paying its way. If the 50:50 rule or the quarterly simplification applies to her, the software also has to report her share, not the whole property, so she should confirm that workflow before choosing a product. If she has freelance work on top, it needs to file property and self-employment as separate quarterly streams, which narrows the suitable products again.

Among the tools in our comparison, the landlord specialists concentrate on property and may not support a sole trade, while some sole-trader products offer little portfolio structure. Sarah can use a broader accounting platform, connect suitable bridging software to the spreadsheets that hold her history, or maintain two specialist products. The last route reduces the demands on each product but creates another reconciliation and login to manage.

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.

Former FHL owners need to check how the old and new rules meet

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

The timing is not pushed back for that reason, even though it can feel as if it should be. 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 separate changes.

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. That can reduce duplicated quarterly detail while each owner continues to report their own share.