Table of Contents
- Over 2,428 holiday rentals are currently listed in Oxford (HomeToGo, April 2025)
- Oxford ranks as the ninth most visited UK city for overseas staying visits, with 28.4 million total visits in 2023, though tourism remains below pre-pandemic levels
- From April 2025, Furnished Holiday Let (FHL) tax reliefs will be abolished, significantly increasing costs for landlords
- Oxford’s tourism economy contributes £2.3 billion annually and supports around 10% of local jobs
Oxford is not only a world-renowned academic and historical hub; it’s also a thriving tourist destination with over 2,428 holiday rentals listed on HomeToGo alone as of April 2025. However, the Budget announcement on 30th October confirmed a major blow for Oxford’s FHL (Furnished Holiday Let) property owners.
With changes that came in April 2025 ending favourable tax advantages, many Oxford landlords will be left significantly worse off, which could make running FHL properties in the city unsustainable.
The policy shift lands at a sensitive time for Oxfordshire’s tourism sector. Although the total value of tourism in the county rose 7% to £2.3 billion in 2023, that figure remains 6% below 2019 in nominal terms and 9% down in real terms. Domestic overnight stays have declined by 5%, while international visits have grown by 9%. At the same time, businesses report tighter booking windows, increased demand for flexibility, and inflation-driven costs all of which are making it more difficult for short-let operators to maintain stability and profitability.
Simon Thomas, Managing Director of Ridgefield Consulting, warns that the tax overhaul will amplify pressure on a sector already under strain:
“For landlords who entered the short-let market to capitalise on Oxford’s strong tourism, these reforms could turn formerly profitable investments into financial liabilities overnight.”
What’s Changing for Furnished Holiday Let Owners?
With the abolition of the FHL regime, landlords are set to lose multiple key financial advantages:
-
Mortgage Interest Relief
Previously fully deductible from rental income, interest payments now only qualify for a flat 20% tax credit, halving the benefit for higher-rate taxpayers.
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Capital Allowances
Landlords can no longer deduct the cost of furnishings or equipment, meaning setup costs become non-recoverable.
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Capital Gains Tax Reliefs
The loss of Business Asset Disposal Relief and rollover relief removes incentives previously available on property sales.
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Pension Contributions
FHL income no longer qualifies as “relevant UK earnings,” reducing how much landlords can contribute to pensions with tax relief.
Example: How the Mortgage Interest Relief Changes Affect Tax Bills
Let’s take an Oxford-based landlord who earns £24,000 a year from a furnished holiday rental and pays £10,000 in mortgage interest.
Mortgage Interest Relief
An Oxford landlord earns £24,000 a year from a holiday let and pays £10,000 in mortgage interest.
- Before April 2025: They deducted the interest, paying tax on £14,000. At 40%, that’s £5,600 in tax.
- After April 2025: They’re taxed on the full £24,000 but get a 20% credit on the £10,000 interest (£2,000). That means £7,600 in tax.
→ Annual tax bill rises by £2,000, despite no change in income.
Furnishing Costs
A new landlord spends £5,000 furnishing the pre-let property.
- Before: They deducted it, reducing taxable income to £19,000 and paying £7,600 in tax.
- After April 2025: They can’t deduct it, so they’re taxed on the full £24,000 — paying £9,600.
→ Another £2,000 increase, just for startup costs.
These changes hit landlords with big mortgages or recent refurbishments hardest. New landlords also face higher barriers to entry with fewer tax offsets.
These changes are particularly hard-hitting for landlords with high mortgage costs or those who have recently invested heavily in setting up or refurbishing their properties. New entrants to the short-let market will also face a tougher path to profitability, as furnishing and setup costs will no longer be deductible.
At the same time, Oxfordshire’s tourism sector is still recovering.
Many businesses report operational challenges such as tighter booking windows, demands for flexibility, and inflation-driven cost pressures. Some are delaying investment, cutting staff, or raising prices to remain viable. As the number of FHL properties potentially declines, local tourism-dependent businesses, from cleaners and tradesmen to cafes and attractions, may also feel the strain.
Simon Thomas commented on the change:
“The changes to the Furnished Holiday Let (FHL) tax regime will significantly impact property owners in Oxford, particularly with the shift from mortgage interest relief to a flat 20% tax credit, increasing tax liabilities and potentially reducing profitability. Higher and additional-rate taxpayers will face greater financial burdens, prompting many to reconsider their investments or even exit the market. We advise landlords to reassess their financial strategies in light of these changes and seek professional guidance to navigate this evolving landscape, as the decline in FHL properties could also negatively affect Oxford’s tourism economy.”
These impending changes could devastate Oxford’s FHL sector. The elimination of vital tax benefits will strip landlords of essential financial support, leading to unsustainable costs and diminished profitability for many. Property owners will face a difficult decision: either absorb the escalating expenses or consider selling properties that no longer provide adequate returns.
For Oxford, this could mean a decrease in the availability of holiday rentals, limiting options for the city’s many visitors and potentially jeopardising the broader tourism economy.
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