Capital Gains Tax on STL Disposal After FHL Abolition: The Number Every Operator Considering Exit Now Needs to Model

In short: A furnished holiday let sold before 6 April 2025 could attract Business Asset Disposal Relief at 10% CGT. A disposal after that date attracts the standard residential-property CGT rate of 24% (higher rate) — nearly two-and-a-half times more. For a portfolio-scale exit that gap is often £100,000+. And BADR itself rises again from 14% to 18% on 6 April 2026 for the qualifying disposals it still applies to. Anyone considering exit in the next 24 months needs the numbers modelled specifically.

The abolition of the Furnished Holiday Let regime hit income tax hardest — the mortgage interest restriction is the largest cash impact for most operators. But for anyone contemplating exit, the CGT consequence is the number that matters most.

What changed on 6 April 2025

Before 6 April 2025, an FHL that had been continuously operated as such for the required qualifying period could be sold with:

• Business Asset Disposal Relief (BADR) applied to the gain, taxed at 10%, up to a lifetime limit of £1 million.
• Holdover relief available on gift transfers.
• Rollover relief available where sale proceeds were reinvested in qualifying business assets.

From 6 April 2025, the FHL regime was abolished for income and capital gains tax purposes. The property is now, for CGT purposes, a standard residential investment property. That means:

• BADR is not available on disposal (it never applied to standard residential property investments).
• Holdover relief is not available on gifts to individuals or non-qualifying trusts.
• Rollover relief is not available.
• The gain is taxed at the standard residential property CGT rates: 18% for gains within the basic rate band, 24% above it.

The BADR rate itself is also rising

For qualifying business disposals that still attract BADR (which most STL disposals no longer do, per the point above), the rate itself is on an upward path:

• 10% up to 5 April 2025
• 14% from 6 April 2025
• 18% from 6 April 2026

The lifetime limit remains £1 million.

What the arithmetic actually looks like

Take a hypothetical STL sold for a £500,000 gain, held by a higher-rate taxpayer with no other capital disposals in the year and the £3,000 annual exempt amount available.

Scenario A — sold before 6 April 2025 (last-day FHL disposal, BADR available): Gain £500,000, less AEA £3,000 = £497,000 at 10% = £49,700 CGT.

Scenario B — sold in 2025/26 or 2026/27, no BADR: Gain £500,000, less AEA £3,000 = £497,000 at 24% = £119,280 CGT.

Difference: £69,580 on a single property disposal. Multiplied across a small portfolio, this quickly runs into six figures.

Even for operators whose disposal window has already closed on the BADR option, the point remains — the 24% rate applies from the first pound of gain above the AEA and is not going away. Planning around the timing, structure, and financing of exit is genuinely material.

The tactical options still available

For operators who have not yet disposed:

1. Spousal transfer before sale. Where the property is held by one spouse and the other has spare AEA and/or a basic-rate band, a no-gain-no-loss transfer to the spouse before sale can use two AEAs and split the gain across two rate bands. Modest but real.

2. Instalment sale. A structured sale across two tax years can, in specific cases, use two AEAs and two basic-rate bands. Legally particular — needs proper drafting to work as intended and not fall foul of s.28 TCGA anti-avoidance.

3. Incorporation and share sale. Where the portfolio is incorporated, the eventual disposal is of shares rather than land — a different CGT calculation and, potentially, a different rate. Incorporation itself is a taxable event (SDLT/LBTT/LTT, plus CGT on the transfer subject to s.162 incorporation relief where available). Only makes sense where the ongoing accounting benefits also stack up.

4. Charitable donation of a slice. A properly-structured gift to charity attracts full CGT relief on the donated portion and income tax relief on the market value. For clients with a philanthropic intent this can substantially reduce the effective CGT rate on the remaining sale.

5. Reinvest into a qualifying EIS/SEIS investment. Gains can be deferred by reinvesting into EIS-qualifying shares, subject to strict conditions and specific advice on the risk profile of the target investments.

Interaction with the 60-day CGT return

Whichever route is used, remember that UK residential property disposals require a CGT return and payment on account within 60 days of completion. Missing this triggers penalties on top of the tax. For any operator planning to dispose, the mechanical compliance side should be lined up before completion, not after.

What operators should do

1. Do not dispose without a specific CGT projection. The projection changes what you would accept as a sale price.
2. Model at least two scenarios: sale now vs sale in 12 months. Rate changes, allowance changes, and property-market changes over that window can be material either way.
3. If exit is on the two-year horizon, consider whether restructuring first improves the effective rate. The right structure depends on the operator's other income and asset position — this is not a rule-of-thumb decision.
4. Line up the 60-day return workflow with your accountant before completion. It is cheaper to prepare it in advance than to catch up under deadline pressure.

The BADR era for holiday-let disposals is over. The planning options that remain are more limited, less generous, and more specific to individual circumstances. All of them require the exercise being done before the property is listed, not after the sale has agreed.

Book a free consultation to model your disposal position.

Sources: ICAEW — Furnished holiday lets in 2025/26 tax return; Brodies LLP — BADR changes from 6 April 2026; Cowgills — Key BADR changes April 2026; Deloitte Taxscape — FHL regime abolished from 6 April 2025.