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If you own rental properties in the UK and other countries, you need to know how tax laws treat your income from these properties. The rules keep UK rental income separate from overseas income. This means you have to calculate profit, loss, and tax for each property business separately.
UK Property Business: Unified Reporting for Domestic Rentals
All income generated from letting UK property is grouped into one single UK property business, provided the ownership is in the same legal capacity. This means if you personally own several UK rental properties, whether residential or commercial, their income and allowable expenses are pooled to determine your overall profit or loss from the property business.
Even if you use a letting agent, the business is still deemed to be conducted by you, the landlord. It’s not a separate business just because someone else manages it.
Abolition of Furnished Holiday Let (FHL) Regime from April 2025
Up until the 2024/25 tax year, furnished holiday lettings (FHLs) within the UK were treated as a separate stream within the UK property business. Although part of the same overall business, FHLs had distinct tax treatment, including restrictions on offsetting losses between FHLs and other lets.
From 6 April 2025, the FHL regime is abolished. As a result, any income and expenses from holiday lets will now be fully amalgamated with all other types of UK rental income. There will no longer be special tax advantages or separation of accounting. This change simplifies reporting but removes previously available tax planning opportunities for those operating holiday accommodation.
Property Businesses Held in Different Legal Capacities
If you own properties in different legal capacities—for example, personally and through a partnership—these are treated as separate property businesses. Income and expenses cannot be mixed across these legal lines. Each business must be accounted for independently when preparing your tax return.
Overseas Property Business: Treated Separately from UK Rentals
Rental income from property located outside the UK falls under a completely separate overseas property business. Just like UK properties, the income and expenses for overseas properties are amalgamated, but they are never combined with UK rental profits or losses.
Before the 2025/26 tax year, furnished holiday lettings in the European Economic Area (EEA) had distinct tax treatment, similar to UK FHLs. From 6 April 2025, the overseas FHL regime will also be abolished, and all overseas property income will be treated in the same way, regardless of whether the property is located in the EEA or beyond.
Practical Example: Consider a landlord who owns:
- Two UK residential buy-to-let properties.
- One furnished holiday let in the UK.
- A commercial property via a business partnership.
- A long-term rental flat in Paris.
- A holiday apartment in Florida.
This landlord has:
- A UK property business: The two buy-to-lets and the UK holiday let (as of 2025/26, these are no longer treated separately).
- A separate partnership property business: Because it’s held in a different legal capacity.
- An overseas property business: The properties in Paris and Florida are calculated independently from UK property.
Tax Compliance and Planning Tips
- File UK and overseas property income separately on your Self Assessment return.
- Do not offset losses between UK and overseas property businesses.
- Post-2025, plan for changes in reliefs previously available for FHLs, such as loss offsets and capital gains benefits.
- Ensure accurate reporting when different legal capacities are involved (e.g., individual vs. partnership ownership).
Understanding how property businesses are categorised and taxed helps landlords comply with UK tax rules and plan effectively. The FHL tax rules ended on 6 April 2025. It’s essential to reassess your rental strategy and consider tax reliefs for the future. If you own rental properties in multiple countries or have various ownership structures, obtaining professional tax advice is essential.