Gift your holiday let by 5 April 2025 to benefit from holdover relief for FHL
If you own a furnished holiday letting (FHL) and are considering passing it on, acting before 5 April 2025 could allow you to take advantage of holdover relief for FHL. After that date, FHLs will lose many preferential tax treatments, and you may no longer be eligible to claim holdover relief for FHL disposals or gifts.
In this blog we explain what holdover relief for FHL means, how it applies to holiday lets, what the rules are (including any changes), some numerical examples, and what you should do now. I
n the penultimate section we’ll explain how Trueman Brown can help (contact: mark@truemanbrown.co.uk, 01708 397262). We finish with an FAQ section.
What is holdover relief for FHL?
“Holdover relief” (often referred to in the context of business assets) allows a donor to defer capital gains tax by “holding over” the gain into the recipient’s base cost.
In the context of a furnished holiday letting (FHL), holdover relief for FHL permits the gifting of the property while rolling over the capital gain—provided certain conditions are met.
The effect is that instead of paying CGT on the gift, the recipient effectively inherits a base cost reduced by the held-over gain; when they later sell the property, their gain is computed as though they had acquired the property at that reduced cost.
Why apply holdover relief before the 5 April 2025 deadline?
One of the key reasons to act before 5 April 2025 is that,
starting from 6 April 2025, FHLs will be treated in the same way as ordinary residential lets for capital gains tax purposes.
That means the special reliefs available to FHLs—including the ability to use holdover relief for FHL when gifting—will no longer be available.
If you delay past 5 April 2025, your gift of a former FHL property would be a disposal subject to normal CGT rules, and you would lose the opportunity to defer the gain via holdover relief. Hence the urgency.
Conditions for claiming holdover relief for FHL
To successfully make use of holdover relief for FHL, the following conditions generally must be satisfied:
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Qualifying business status
The person making the gift must be carrying on a business (e.g. as a sole trader or partner) or holding shares in a company (or holding voting rights, depending on circumstances). The property must be a business asset. -
Use in the business
The property (the FHL) must have been used in the business or by the entity making the gift. -
Joint claim requirement
Both the donor and the recipient must jointly claim the relief (by completing the relevant hold-over relief claim forms) in their Self Assessment returns. -
Time of gift
The gift must be completed on or before 5 April 2025 (i.e. before the regime change) to benefit from holdover relief for FHL. -
Connected parties restrictions
If the gift is to a connected person (e.g. your child), the valuation is based on market value. The relief allows you to defer the gain rather than crystallising a CGT liability at gifting time.
If any of these conditions fail, you may lose access to holdover relief and face a CGT charge on the gift.
Example: how holdover relief for FHL works in practice
Suppose Alice owns a holiday let which qualifies as an FHL. She bought it in 2008 for £150,000, and its current market value is £450,000.
She wants to gift it to her son Ben before 5 April 2025, and both want to claim holdover relief for FHL.
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The gain is £300,000 (£450,000 minus £150,000).
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Alice makes a joint claim for holdover relief, so she pays no CGT at the time of the gift.
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Ben’s base cost for future disposal becomes £150,000 (i.e. £450,000 less the held-over gain).
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Later, if Ben sells the property, his gain will be calculated as (sale price minus £150,000).
If Alice waited until after 5 April 2025, she would lose the ability to claim holdover relief for FHL, and would incur CGT at the point of gift, possibly leaving no funds to pay the tax.
It’s worth noting that when FHL status is lost (post-5 April 2025), some transitional issues may arise, and HMRC may require adjustments or deny relief.
For this reason, acting ahead of the cut-off is crucial.
Things to watch out for (risks & planning points)
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Valuation disputes: HMRC may challenge the market value used for the gift; ensure you use a robust valuation by a qualified surveyor.
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Claim timing: The holdover claim must be filed in your Self Assessment by the relevant deadline.
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Inheritance tax (IHT) interaction: Gifting may affect lifetime IHT allowances and rules (e.g. the 7-year rule).
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Future selling by the recipient: The held-over gain increases their exposure to CGT on disposal.
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Loss of business use: If at any time the property ceases to qualify as FHL or business asset, relief may be jeopardised.
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Record keeping: Keep full documentation (valuation, claim forms, agreements) to support the relief.
Because tax laws sometimes shift, you must check whether there have been further HMRC or Budget updates affecting FHLs and holdover relief for FHL (as of now, no further major changes beyond the 2025 cut off are in force, but always verify before acting).
How Trueman Brown can help you with holdover relief for FHL
Dealing with capital gains, property gifting, and relief claims is complex — you don’t have to do it alone.
At Trueman Brown, we specialise in tax planning for property owners, including those with furnished holiday lettings.
We can help you:
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Assess whether your property truly qualifies as an FHL and meets relief conditions
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Determine if you and the recipient both meet the necessary business criteria
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Commission and review professional valuations
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Prepare and file the joint holdover relief claim in your Self Assessment returns
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Advise on the interaction with inheritance tax, IHT exemptions and lifetime gifting strategies
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Monitor any legislative changes and ensure you remain compliant
If you’d like us to guide you through claiming holdover relief for FHL, or to review your options, please get in touch. You can reach us at mark@truemanbrown.co.uk or call 01708 397262. We’d be happy to discuss how we can support you.
FAQ — holdover relief for FHL
Q: What exactly happens to FHL tax treatment after 5 April 2025?
A: From 6 April 2025, FHLs will be treated as other residential lets for CGT and relief purposes. This means special reliefs, including holdover relief for FHL, are no longer available for new gifts/disposals.
Q: Can I gift a share of my FHL and still claim holdover relief for FHL?
A: Yes — partial gifts are possible, so long as the conditions are met and the claim covers the gifted portion adequately.
Q: Do both donor and recipient file the claim separately?
A: No — the relief must be claimed jointly. Both donor and recipient must include the claim in their Self Assessment returns.
Q: Is there a time limit for making the holdover relief claim?
A: Yes — typically the claim must accompany your Self Assessment filing by the statute deadline (which may vary depending on your tax year). Missing that deadline may jeopardise the relief.
Q: What if my holiday let stops qualifying as FHL before the gift?
A: If it no longer meets FHL criteria (for example, usage thresholds or availability tests), you risk losing eligibility for holdover relief for FHL. You should review compliance carefully.
Q: Will using holdover relief for FHL avoid IHT entirely?
A: No — holdover relief deals with CGT, not IHT. IHT is subject to separate rules (for example, the 7-year rule) and you should consider its interaction in your wider estate planning.
Q: What happens when the recipient later sells the property?
A: The held-over gain is added to their base cost, so the gain is deferred until disposal. When they sell, their CGT liability is computed using that lower base cost, effectively passing on the tax burden.
If you have any other questions about holdover relief for FHL or your specific situation, don’t hesitate to contact us at mark@truemanbrown.co.uk or 01708 397262.
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