Selling a Holiday Let After FHL Abolition: Personal Capital Gains Tax vs Company Exit Questions

Choosing whether to buy a UK holiday let personally or through a limited company is often reduced to one question: which structure produces the better annual rental-profit result?

For a buyer purchasing after the abolition of the Furnished Holiday Lettings (FHL) regime, that comparison is incomplete. The structure also affects what happens if you later sell, refinance, retain cash for another project or need money personally.

Before exchange, consider the whole ownership cycle. If you sell, will you want the net proceeds in your personal bank account? Could funds remain in a company? Will you lend part of the deposit or purchase costs to a company? Is refinancing part of the plan? Are you assuming that a future buyer will buy shares in a company rather than the property itself?

Those questions do not produce an automatic answer. They identify the facts that need adviser-led modelling before a commitment is made.

The central post-abolition point is that the special FHL Capital Gains Tax treatment no longer applies from 6 April 2025. For Corporation Tax purposes, the relevant change applied from 1 April 2025. Broadly, a holiday-letting business is no longer treated as a trade simply because it satisfied the former FHL conditions. For a new buyer, it is therefore unsafe to assume that a future holiday-let exit will qualify for Business Asset Disposal Relief (BADR) because the activity is holiday letting. [1]

This article explains the questions to take to your accountant and solicitor. It is general educational information, not a recommendation to buy personally or through a company. The figures are deliberately simplified illustrations, not quotes, forecasts or tax calculations for a real transaction.

Video guide

Selling a Holiday Let After FHL Abolition: Personal Capital Gains Tax vs Company Exit Questions

Watch the practical walkthrough, then use the evidence checklist below to test the property before making an offer.

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Begin with the expected exit

Before comparing ownership structures, record a provisional answer to these five questions:

How long might I own the property? A shorter project may have a different exit profile from a long-term family or business plan.
What is the likely route? A property sale, refinance and continued ownership, company share sale, transfer to family or gradual portfolio reduction?
Who needs cash after the event? You personally, co-owners, a spouse or civil partner, or another activity carried on by the company?
How will a company be funded? Will your contribution be share capital, a documented loan from you to the company, or a mixture?
What facts could change? Income, ownership shares, debt, expenditure records, losses, residence, tax rules and the eventual buyer can all matter.

The purpose is not to predict your tax bill years in advance. It is to avoid choosing a structure solely on an assumed annual-profit result and then discovering, at refinance or sale, that the cash route does not match your needs.

What FHL abolition changed for future disposals

HMRC says that the special FHL treatment for capital gains no longer applies from 6 April 2025. It also says that removal of the former FHL provisions means an FHL business is no longer treated as a trade from that date, or from 1 April 2025 for Corporation Tax purposes. [1]

For a buyer acquiring a holiday let after those dates, the practical consequence is narrow but important: do not build the exit model around the assumption that BADR will apply simply because the property is holiday accommodation. HMRC states that BADR is not available for a disposal of all or part of an FHL business on or after 6 April 2025, or for a relevant company-share sale where the company is no longer a trading company because of the abolition. There are limited rules concerning an actual cessation before 6 April 2025; these are not a planning feature for a new acquisition. [1]

Abolition does not mean that every disposal receives identical tax treatment. Instead, separate the ownership layer, the asset being sold and the later destination of cash:

An individual who owns the property directly may make a personal gain on a property sale.
A company that owns the property may make a taxable gain within the company when it sells the property.
A shareholder may potentially sell shares rather than the property, but whether that is commercially possible is a separate question.
After a company sale, cash might remain in the company, repay a genuine amount owed to a director, or potentially be distributed by a lawful route. The legal, accounting and tax treatment depends on the facts.

A single headline tax rate cannot answer all of those questions.

Personal ownership: direct property sale and personal CGT

If you own the holiday-let property personally, a later sale may create a Capital Gains Tax calculation for you. The gain is not simply the sale price. Relevant acquisition costs, disposal costs, qualifying expenditure and available losses or reliefs can affect the result. The correct treatment depends on the facts and on the records retained.

For the 2026/27 tax year, the annual exempt amount for most individuals is £3,000. From 6 April 2026, the published individual CGT rates are 18% and 24%; the rate applicable to a gain depends on taxable income and the interaction between income and gains. [2]

There can also be a short reporting timetable. For a UK residential-property disposal with a completion date on or after 27 October 2021, HMRC says that reporting and payment are due within 60 days where a report and payment are required. [3]

Illustration only: a direct personal sale

Assume one individual, purely for illustration:

buys for £300,000;
later sells for £400,000;
has £10,000 of total allowable acquisition, disposal and qualifying enhancement costs;
has no capital losses available; and
can use the £3,000 annual exempt amount.

The simplified gain would be £90,000. Deducting the annual exempt amount gives an illustrative taxable gain of £87,000. If the whole taxable gain were charged at 24%, the illustrative CGT amount would be £20,880.

This is not a calculation for a purchase or sale. Income in the sale year, ownership percentages, losses, detailed expenditure treatment, connected-party rules, residence, other disposals and later rule changes could all alter the result.

The decision-useful point is simply that, where an individual owns the property and sells it, the sale proceeds and that individual’s CGT position sit in the same ownership layer. There is no separate company merely because the net cash is then received personally. That does not make personal ownership automatically preferable: finance, annual profit taxation, administration, risk, ownership flexibility and individual circumstances remain relevant.

Company ownership: separate the property sale from personal cash

A limited company is a separate legal person. If it owns the holiday let and sells the property, the company receives the sale proceeds and calculates its taxable position. The shareholder does not automatically receive the sale cash personally.

The published Corporation Tax rate for company profits is 25%. A 19% small-profits rate applies where profits are £50,000 or less, and marginal relief may be relevant between £50,000 and £250,000. The thresholds can be reduced for short accounting periods and associated companies. [4]

The useful comparison is therefore not “personal CGT versus 25% Corporation Tax.” A company asset sale can involve two linked but distinct questions:

What Corporation Tax is due on the company’s taxable profits, including the relevant gain?
After that, does money need to leave the company for the shareholder’s personal use, and if so by what lawful and properly documented route?

If the expected plan is for funds to remain in the company, the personal-cash question may be deferred. If the expected plan is to sell and use cash for a personal home, personal debt or living costs, it is immediate. The company sale calculation and the shareholder’s position should then be modelled together.

Dividends are a separate shareholder question

A dividend is not simply a label for withdrawing company cash. It is paid to shareholders and requires appropriate company-law and accounting treatment. For 2026/27, the dividend allowance is £500. Above that allowance, published dividend tax rates are 10.75% for basic-rate taxpayers, 35.75% for higher-rate taxpayers and 39.35% for additional-rate taxpayers. Other income affects which band or bands apply. [5]

For that reason, it is potentially misleading to compare a personal CGT rate only with Corporation Tax when the intended outcome is an immediate distribution of company sale proceeds. The company’s tax position and the shareholder’s cash-extraction position are separate parts of the same practical decision.

Illustration only: company asset sale followed by a dividend

Use the same simplified £90,000 gain, and assume only for a mechanical example that:

the company’s Corporation Tax on that amount is 25%;
£67,500 remains after that assumed tax charge;
a distribution of the full £67,500 is lawful and made in the same tax year;
the shareholder has already used the £500 dividend allowance; and
the whole dividend falls within the higher-rate dividend band of 35.75%.

On those assumptions, the illustration gives £22,500 of Corporation Tax. Dividend tax on £67,500 at 35.75% would be £24,131.25. The combined illustrative amounts would be £46,631.25.

This is not an effective-rate promise and not an endorsement of a sale-and-dividend route. Actual taxable profits, Corporation Tax rate, available reliefs, distributable reserves, shareholder income and the way cash is handled may all differ. The illustration exists only to show why Corporation Tax alone is not a complete company-exit comparison when personal cash is required soon after sale.

Director’s loans: document the funding from day one

A company buyer may provide the deposit, purchase costs or working capital personally. Where money is genuinely lent to the company rather than introduced as share capital, the company may owe the director a loan.

GOV.UK confirms that a company does not pay Corporation Tax on money that a director lends to it. [6] A properly evidenced credit balance on a director’s loan account can therefore be relevant later: repayment of money that the company already owes the director is conceptually different from a dividend or informal withdrawal of later sale proceeds.

That does not mean sale cash becomes tax-free merely because a director’s loan exists. It means the balance-sheet facts matter. The funding intention, paperwork, bank trail, loan account and company records should agree.

The reverse position also needs care. Money taken from a company that is not salary, a dividend, expense repayment or repayment of money previously lent can be a director’s loan. HMRC describes reporting and tax consequences in some circumstances. For example, where a relevant shareholder-director loan is outstanding nine months after the end of the Corporation Tax accounting period, a 33.75% Corporation Tax charge can apply, subject to the detailed rules; a later repayment can give rise to a claim, but not for interest. [7]

The practical pre-purchase lesson is straightforward: decide whether company funding is intended to be equity, a documented loan or both, and maintain records that reflect that decision.

Refinancing changes the cash-flow scenario, not the ownership route

Refinancing is not a sale. It may nevertheless change the later exit because it changes debt, interest costs, lender conditions, fees, cash reserves and the amount of sale cash available after loan repayment.

Treat it as a separate scenario before choosing the structure:

Under personal ownership, would refinance cash be received personally while the property continues to be owned, and what debt would remain on a later sale?
Under company ownership, would cash remain in the company, repay a documented director’s loan, support another company activity or be needed personally? Each possibility needs separate accounting and tax review.
Under either structure, borrowing is debt secured against an asset. It is not a substitute for exit-tax analysis.

A useful model has at least three scenarios: hold, refinance-and-hold, and sell. If a structure only appears attractive because of a cash route you do not expect to use, the comparison is incomplete.

Property sale or company share sale: do not assume the buyer

A company owner may hear that selling the company’s shares could produce a better result than the company selling the property. It should not be assumed in an acquisition model.

A share sale and an asset sale are different transactions. In a share sale, the buyer acquires the company and its history, records, obligations and risks. In an asset sale, the buyer acquires the property while the seller retains the company. The buyer’s preference, due diligence, lender requirements, title issues and contractual protections can affect whether either route is viable.

FHL abolition removed the previous assumption that a company carrying on holiday letting is a trading company for BADR purposes. HMRC expressly states that BADR is not available on a post-6 April 2025 relevant share disposal where the company is no longer a trading company because of the abolished FHL rules. [1]

The appropriate buyer conclusion is not “never use a company.” It is: do not assume a share buyer, a particular relief or a preferred transaction structure will exist at an unknown future sale date.

Pre-purchase exit checklist

Before exchange, record these points and take them to an accountant and solicitor with relevant property and company experience:

Intended holding period and earliest realistic sale year.
Likely exit: hold, refinance, property sale, potential share sale or another route.
Whether sale or refinance cash is expected to be needed personally or could remain in the company.
Legal owners, beneficial percentages and sources of funds.
Whether each company contribution is equity, a director’s loan or both.
A file for acquisition costs, improvement invoices, selling costs, loan documents and company funding records.
A personal-sale illustration based on current rates and your likely income position.
A company asset-sale illustration that considers taxable profits, associated companies, shareholder income and whether any distribution would be lawful.
A refinance scenario showing debt, fees, cash destination and the debt likely to be repaid from a later sale.
The date on which the model was prepared, because rules and rates can change.

Conclusion

After FHL abolition, choosing personal or company ownership for a holiday let is an end-to-end ownership decision, not simply an annual rental-profit comparison.

Personal ownership may be simpler to analyse where the likely plan is a direct property sale followed by personal use of the net proceeds. Company ownership may warrant investigation where there are wider commercial reasons, funds may remain within the company, or funding has been deliberately structured and documented. But where the company sells the property and the shareholder needs personal cash, the company’s tax calculation is only one part of the analysis.

Before buying, make the holding period, likely exit route and intended destination of cash explicit. If the conclusion depends on BADR, a presumed future share buyer, a substantial director’s-loan repayment or an untested refinance plan, treat that as an adviser-review point rather than part of a return forecast.

Disclaimer: This article is general educational information, not legal, tax, mortgage, planning, valuation, financial or investment advice. Tax treatment depends on individual facts and may change. Obtain advice from a suitably qualified UK tax adviser, accountant, solicitor and, where relevant, regulated mortgage adviser before purchasing, refinancing, selling, transferring property or extracting company funds.

Next step: If the supplied Deal Checker is live and captures these fields, use it to record your intended holding period, likely exit route and any assumptions that need adviser review before you rely on them.

Sources

[1] HMRC, CG73505: Furnished holiday lettings: consequences of abolition.

[2] HMRC, Capital Gains Tax rates and allowances.

[3] HMRC, Capital Gains Tax: reporting and paying Capital Gains Tax.

[4] HMRC, Corporation Tax rates, expenses and reliefs: Rates.

[5] HMRC, Tax on dividends: Check if you have to pay tax on dividends.

[6] HMRC, Director’s loans: If you lend your company money.

[7] HMRC, Director’s loans: If you owe your company money.