Stranded capital allowances after FHL
When the FHL regime ended, your capital allowance pool faces a balancing adjustment. Often four-figure money. Here is how to claim it.
What changed at FHL end
Until April 2025, qualifying furnished holiday lets could claim full capital allowances on furniture, fittings, and integral features (heating, water, electrical systems). The pool sat on the balance sheet, written down each year by writing-down allowances, and reduced by any disposals.
When the FHL regime was abolished, the pool stops accruing new allowances. What sits in the pool at the end of the final FHL year (typically 2024–25) faces a balancing adjustment. The remaining tax written-down value is treated as if the assets had been disposed of at nil proceeds, generating a balancing allowance equal to the pool balance. That allowance is deductible in the final FHL year.
The numbers
A typical Marlow short-let with a fitted kitchen, two bathrooms, fitted carpets, and standard furniture, six years post-acquisition, often sits with a tax written-down pool of £6,000–£12,000. At higher-rate tax that is £2,400–£4,800 of deduction available in the final FHL year. Larger or higher-spec properties can run into five figures of pool balance.
This is one of the few places in landlord tax where the regime change actually generates an immediate cash benefit, in the form of a one-off deduction. Landlords who file their own return and miss it are leaving real money on the table. Network firms always check the integral-features pool when onboarding a former FHL client.
Documentation needed
To claim the balancing allowance properly, the firm needs the capital allowance pool history: when items entered the pool, original cost, any prior disposals, and the running tax written-down value. For long-running FHLs, this is sometimes patchy in the records (especially for clients who switched accountants over the years).
Where records are missing, the pool can sometimes be reconstructed from acquisition documents and prior tax returns. Network firms typically reconstruct one year at a time, working backwards, until the original integral features cost is established. The reconstruction itself is a deductible expense for the year it is performed.
What about repairs going forward?
Post-FHL, replacement of furniture and white goods in a let property falls under the Replacement Domestic Items relief, available for furnished lets generally. The tax treatment differs slightly from capital allowances (no pool, no writing-down, just direct deduction in the year of replacement) but the practical effect for most landlords is similar.