The withdrawal of the Furnished Holiday Let (FHL) regime from the beginning of the 2025/26 tax year is likely to result in higher tax liabilities for many owners, particularly those who hold property jointly.
Couples and co-owners who previously benefited from flexible income allocation rules under the FHL regime may now find themselves in a less favourable tax position.
Taking steps to understand these changes and act accordingly could help avoid unexpected costs.
Revised treatment of jointly owned property
One of the key benefits of the FHL rules was the ability to allocate rental income between owners based on actual ownership proportions or agreed income shares, allowing for tax planning that took account of differing Income Tax bands.
Under the new regime, this flexibility no longer applies. In the absence of specific action, income from jointly owned properties is now automatically split on a 50:50 basis for tax purposes, regardless of how ownership is structured or income is received.
This could be disadvantageous where one party pays tax at a higher rate.
Using Form 17 to declare unequal shares
Joint owners who wish to apply a different income split must now submit Form 17 to HM Revenue & Customs (HMRC), accompanied by documentary evidence, such as a declaration of trust.
This evidence will show the actual beneficial ownership of the property.
Form 17 does not alter the legal ownership itself but is used to inform HMRC of how rental income should be apportioned for taxation purposes.
Submission deadlines and timing
Form 17 becomes effective from the date it is signed by the last party and must be received by HMRC within 60 days of that date.
If it is submitted late, it will be invalid, and the default 50:50 income split will apply.
Crucially, any income received before the form is signed cannot be reallocated.
Only future income from the date of the declaration will fall under the revised arrangement.
