For the tax year 2024/25 and earlier, UK and European Economic Area (EEA) FHL businesses are treated differently from UK and overseas property businesses for tax purposes. From 6 April 2025, the concept of a separate FHL business is removed. This means that, for 2025/26 onwards, UK FHL activities are treated as part of the person’s UK property business and EEA FHL activities as part of their overseas property business.

Practical implications 

For 2025/26 onwards, the rules that apply for calculating the taxable profits and relieving the allowable losses of a UK or overseas property business also apply to the FHL activities. In other words, special rules no longer apply to the FHL activities.  

The key income tax changes are summarised in the table below. It is assumed that the FHL activities do not amount to a trade and, in the case of jointly-held property, that the activities are not carried on in partnership

Transitional rules  

The following transitional arrangements apply: 

• Capital allowances. Capital allowances may be claimed for 2025/26 onwards in respect of any unrelieved expenditure included in a capital allowances pool by 5 April 2025 (CA20025).
• Losses. Unrelieved losses (PIM4175):
  • from a UK FHL as at 5 April 2025 can be carried forward against the profits of the UK property business for 2025/26 onwards; and
  • from an EEA FHL as at 5 April 2025 can be carried forward against the profits of the overseas property business for 2025/26 onwards.

Brought forward losses should be included on the UK property (SA105) or foreign income (SA106) supplementary pages as appropriate. 

Capital gains

For disposals on or before April 2025, properties that were part of an FHL business benefited from a number of capital gains tax (CGT) reliefs, including: 

• roll-over relief (self assessment helpsheet HS290);
• gift relief (self assessment helpsheet HS295); and
• business asset disposal relief (BADR) (self assessment helpsheet HS275). 

Where an FHL property is disposed on or after 6 April 2025: 

• it is not possible to make a claim for roll-over relief, gift relief or BADR in respect of the gain. However, this is subject to an exception: where the FHL business ceased before 6 April 2025 and the FHL property is sold within three years of the date of cessation, it may be possible to make a claim for BADR (CG73505); and
• any gain arising on the disposal may be increased, or any loss reduced, as a result of a prior claim for roll-over relief or gift relief. Awareness of this is likely to reduce as time goes by and FHL treatment is forgotten. It is important that records of prior claims to roll-over relief and gift relief are retained.  

Other points to note with regard to CGT include that: 

• the abolition of the FHL regime does not amount to a cessation of the FHL business for CGT purposes; and
• where an FHL property (the old asset) was sold before 6 April 2025 and another asset that qualifies for roll-over relief (the new asset) was acquired on or after that date, a claim can be made to roll-over the gain on the old asset against the cost of the new asset (CG73505).