Skip to content 
If you’ve built a treehouse in your garden or on your land, you might be wondering whether HMRC will be interested in it, especially if you’re planning to let it out for income. From April 2025, important tax changes come into effect that impact how treehouses used for rental purposes are taxed.
What’s Changing in 2025?
Starting 6 April 2025, the UK Government has abolished the Furnished Holiday Let (FHL) tax regime, ending tax reliefs and capital gains benefits for qualifying holiday accommodations like treehouses.
After this date, all short-term lets, including treehouses, will be subject to the standard residential property tax rules. This change eliminates the financial advantages once available to landlords who operated qualifying short-term lets.
Is My Treehouse Taxable?
If your treehouse is used solely for personal purposes, there are no tax implications. It’s treated as part of your main residence, and no reporting or tax payment is needed.
However, once you start earning money by letting out your treehouse—through platforms like Airbnb, Booking.com, or direct booking—that income becomes taxable, and HMRC expects you to declare it through Self Assessment.
Whether it’s let occasionally or throughout the year, rental income must now be treated under the standard property income rules, not the FHL regime.
Key Tax Areas to Consider
Income Tax
From April 2025, any income you earn from renting out your treehouse will be taxed under the general UK property income framework.
This means:
- You can deduct allowable expenses such as maintenance, utilities, advertising, and insurance.
- If you replace domestic items like beds or sofas, you can claim the Replacement of Domestic Items Relief.
- Mortgage interest is no longer fully deductible. But you can claim a 20% tax credit on finance costs.
- Your rental profits will be added to your overall income and taxed according to your personal tax band.
Property Income Allowance
If your total rental income from all properties is under £1,000 per year, you may not need to declare it at all, thanks to the property income allowance.
However, if your income exceeds this threshold, or if you wish to claim expenses instead of the £1,000 allowance, you’ll need to complete a Self-Assessment tax return.
Capital Gains Tax (CGT)
When you sell the property or land that includes the treehouse, Capital Gains Tax may apply, especially if the treehouse has been used for income generation.
Previously, under the FHL regime, landlords could benefit from Business Asset Disposal Relief, which reduced CGT rates on the sale of qualifying assets. From April 2025, these reliefs no longer apply. Treehouses will now be treated like any other part of a residential rental business.
If you sell at a profit, you’ll pay CGT based on:
- The difference between sale proceeds and your allowable costs (build costs, materials, improvements).
- Any gain exceeding your annual CGT exemption (reduced to £3,000 for 2024/25) will be taxable.
- The rate of CGT depends on your income: 18% for basic rate taxpayers, 24% for higher and additional rate taxpayers on residential gains.
It’s essential to maintain good records of your construction and improvement expenses so you can reduce the taxable gain when the time comes to sell.
VAT and Treehouse Rentals
Most small-scale landlords won’t need to worry about VAT. However, if your total income from property and other business sources exceeds thevat (currently £90,000), you may be required to register and charge VAT on bookings.
In such cases, you could also reclaim VAT on your treehouse-related expenses. Still, this applies only to those with significant turnover and should be reviewed with a qualified accountant.
Business Rates and Council Tax
If your treehouse is available to let for short stays for more than 140 days a year, some local councils may assess it for business rates instead of council tax.
However, with the removal of the FHL regime, the conditions under which treehouses qualify for Small Business Rate Relief may tighten, and councils may begin to treat these properties under standard residential or mixed-use classifications.
It’s a good idea to check how your local authority handles small holiday accommodation, particularly if you are expanding or operating multiple lets.
Spousal Income Splits and Pension Implications
Previously, FHL profits could be split flexibly between spouses or civil partners regardless of ownership percentage. From April 2025, this benefit disappears.
Now, rental income must be split 50:50 unless you submit Form 17 to HMRC and provide evidence of actual ownership shares.
Additionally, one of the major changes is that rental income from treehouses will no longer count as relevant earnings for pension contributions. That means you can no longer base pension payments on this income to receive tax relief.
Transitional Considerations: The Final Year of FHL
The 2024/25 tax year is the final period where the old FHL rules apply. If your treehouse qualifies under the historic conditions—being let commercially for at least 105 days and available for 210—you may still benefit from the outgoing regime for this one final year.
You can also still use averaging or period of grace elections if your property narrowly misses these letting thresholds in 2024/25.
Any capital allowance pools you’ve built up over the past years can still be written down in future years under transitional rules. However, no new capital allowances can be claimed on holiday let properties from April 2025 onwards.
Adapting to the New Landscape
The end of the Furnished Holiday Lettings (FHL) tax system has a significant impact on landlords. If you depended on FHL tax benefits, think about this:
- Adjust your tax planning to standard property income rules.
- Reassess the profitability of your letting activities.
- Maintain detailed financial records for income and expenses.
- Review CGT exposure and plan exits accordingly.