Abolishment of Furnished Holiday Let Rules Prompts Shift to Limited Company Mortgages

It’s hit the news this week that the government is set to remove the Furnished Holiday Let (FHL) status from holiday let properties, and this has created quite a stir in the holiday let market.

Holiday lets are regarded a business and the FHL rules were created to reflect this fact. Now that the government has announced that the FHL rules are to be removed from April 2025, property investors have started looking for new ways to structure and set-up their operations in order to work around these changes.

Limited company holiday let mortgages

The immediate effect of the government’s announcement has been a surge in the interest for limited company holiday let mortgages.

According to Holiday Cottage Mortgages (HCM), a leading specialist mortgage broker that arranges holiday let mortgages, the Google search traffic for the term “buying a holiday let through a limited company” has surged more than 700% overnight as both existing and potential new holiday let owners figure out the best way to structure their investments.

How does this type of mortgage solve the issue?

By owning the holiday let property within a limited company, you can legitimately offset all regular operational costs against your rental income, including the mortgage interest.

This practice first made headlines when the government implemented punitive changes in the buy-to-let market some years ago, which resulted in buy-to-let landlords being unable to offset the interest on their mortgage against their rental profits for tax purposes.

In response to this, buy-to-let investors started buying and running their properties through a limited company, which is known as a Special Purpose Vehicle (SPV).

“Some holiday let property investors will switch tactics and go down this route too.” says Andy Soye, Director of HCM. “It’s not for everyone, but for many, owning a property in an SPV will provide a great way forward following the changes to the FHL regime.”

How to get a limited company holiday let mortgage

Limited company holiday let mortgages are readily available, both as interest only and repayment types although you will need to engage with niche lenders such as the smaller building societies who use manual underwriting. Mortgage applications for such are harder to get over the line, but with the right approach and support, they can provide a great way to structure your holiday let purchase to mitigate some of the issues caused by the government’s latest move.

“The SPV needs to be set-up in the right way and the deposit funds must come from a recognised route, such as a director’s loan.” says Andy Soye. “It’s vital that you work with an expert mortgage broker in this field to ensure you get the structure right, or else it will be rejected by the lenders.”

HCM have previously written a very popular article about buying a holiday let through a limited company which has been updated to reflect the new changes.

“Your personal income tax situation plays an important role in deciding whether you should structure your investment with a SPV and we recommend that you speak to a professional accountant to explore all options before making any decision.” suggests Andy Soye.

So what next?

The demand for beautiful cottages and staycations remains buoyant as ever. Staying in a UK holiday let has huge advantages over a B&B or hotel, and the market for this kind of tourism remains strong.

With that drive firmly in place, holiday letting will continue to be a major activity in the UK and holiday let investors will continue to have the opportunity to make money in this market, so long as they structure their purchases and operations correctly.

For further information on how to get a regular or limited company holiday let mortgage, please get in touch with HCM here and speak to an advisor.