You own a stone cottage in the Cotswolds or a terrace in the Lake District, let furnished to holidaymakers by the week, and you live in France. Until recently that cottage enjoyed a privileged British regime, the furnished holiday lettings regime, known as the FHL regime: a set of business-like tax advantages for short-term holiday accommodation. From April 2025 that regime is gone. London has folded holiday cottages into the ordinary property business, withdrawn the capital allowances, restricted the loan interest, merged the losses and removed the capital gains reliefs. Many British owners in France discovered the change only when their accountant presented a higher British bill, or when the French inspector questioned why the British profit on the return no longer matched the French one. This guide explains what the abolition takes away, how the cottage is taxed in Britain now, how France taxes the same cottage as a location meublée, a furnished letting, and how to challenge the double charge when the treaty credit goes missing. For the general mechanics of a first French return, our hub guide to your first French tax return with forms 2042, 2047 and 3916 and the treaty tie-breaker remains the starting point, and readers with an ordinary long-term British letting should read our companion analysis of who taxes UK rental income, how to declare it and how to challenge double tax and social charges, which covers the unfurnished case this article does not repeat.
I. What did London abolish in April 2025, and why does it still matter if you live in France?
A. Which holiday-let advantages disappear, and how is your cottage taxed in Britain now?
The official policy paper — Furnished holiday lettings tax regime abolition on GOV.UK — published by HM Revenue and Customs (HMRC), the British tax authority, explains the abolishment of the furnished holiday lettings tax regime from April 2025, removing the tax advantages that landlords offering short-term holiday lets held over providers of standard residential property. The detailed implementation pages — see the abolition detail on GOV.UK — then list what changes. First, the separate computation disappears: the measure removes the specific tax treatment and separate reporting requirements for holiday lettings, so the cottage joins the ordinary British property business and its profit is calculated under the same rules as a long-term buy-to-let. Second, loan interest is now restricted: the finance cost restriction rules apply, so loan interest is restricted to basic rate for income tax, instead of the previous full deduction against the holiday-let profit. An owner with a large mortgage on the cottage therefore sees part of the interest lose its value at higher rates, exactly like an ordinary landlord. Third, the capital allowances go: the reform removes capital allowances rules for new expenditure and allows replacement of domestic items relief instead, meaning new furniture, boilers and fittings can no longer generate upfront allowances, while an existing pool of unrelieved expenditure can continue to attract writing-down allowances year by year until exhausted. Fourth, the loss rules merge: previously a loss from the holiday-let business could only be carried forward against future profits of that same holiday-let business, whereas after the change the former holiday-let property forms part of the general United Kingdom or overseas property business as appropriate, with amalgamated profits and losses, and pre-existing holiday-let losses carried forward may be set against future profits of that wider property business. Fifth, the capital gains reliefs fall away: holiday-let properties were eligible for roll-over relief, business asset disposal relief, gift relief, relief for loans to traders and the substantial shareholding exemptions, and after the change eligibility ceases, subject to a transitional tail where business asset disposal relief may still apply to a disposal within the normal three-year period following a cessation that met the holiday-let conditions before repeal. Sixth, the income no longer counts as relevant United Kingdom earnings for maximum pension relief. Reporting is simplified in one respect: businesses no longer calculate holiday-let profits separately, which helps owners with both a cottage and an ordinary rental, but every simplification here comes with a higher bill attached.
For an owner living in France, three consequences follow immediately. The British profit for the year straddling April 2025 must be split between the old and new rules, with the pre-abolition period under holiday-let treatment and the post-abolition period under ordinary property rules, so the Self Assessment return, the annual British tax return, for that year needs two computations and a clear white-space note. The Non-Resident Landlord Scheme, the British collection system for rents paid to landlords abroad, continues to apply exactly as for ordinary lettings: the letting agent deducts basic-rate tax unless HMRC has authorised gross payment on form NRL1i, and the income is reported with the residence and property schedules. And the new British profit figure, computed without the old allowances, becomes the input for the French treaty credit described below, which means the French return must be reconciled to the new British measure rather than to last year’s holiday-let computation. Owners who simply copy the previous year’s method into the new year’s French schedule are the ones who receive an demande d’éclaircissements, a request for clarification, from the French inspector.
A short Paris and Ile-de-France note is useful because many readers in this position manage the cottage remotely. A British family in Paris, Boulogne-Billancourt or Versailles with a cottage near Bath follows exactly the same British rules as a family in the Dordogne: the Self Assessment goes to HMRC, the French schedules go to the Service des impôts des particuliers (SIP), the local personal tax office, of the French home, increasingly through the online espace particulier on impots.gouv.fr. The Paris specificity is practical: managing-agent statements arrive in English with British accounting headings, and the inspector will ask for a reconciliation between the agent’s gross, the British property-business profit and the French furnished-letting profit, which differ by construction. Attach that one-page reconciliation to the French return from the start rather than waiting for questions.
B. Are you still French tax resident on this cottage income, and does the treaty still let Britain tax first?
French residence is decided before any treaty analysis. Article 4 A of the General Tax Code states: “Les personnes qui ont en France leur domicile fiscal sont passibles de l’impôt sur le revenu en raison de l’ensemble de leurs revenus.” Once France regards you as tax resident, it taxes worldwide income, including the Cotswolds cottage. Article 4 B of the same Code opens with: “Sont considérées comme ayant leur domicile fiscal en France au sens de l’article 4 A :” It then lists the home-or-principal-stay test, the professional-activity test and the centre-of-economic-interests test, any one of which suffices, before adding the treaty safety valve: “Les personnes qui satisfont à l’un au moins des critères fixés aux a à c du présent 1 ne peuvent toutefois pas être considérées comme ayant leur domicile fiscal en France lorsque, par application des conventions internationales relatives aux doubles impositions, elles ne sont pas regardées comme résidentes de France.” A British owner whose family home, daily life and schooling are in France will normally be confirmed as French resident by the tie-breaker in Article 4 of the France-United Kingdom Convention of 19 June 2008, which examines permanent home, centre of vital interests, habitual abode and nationality in that order. Brexit did not disturb this architecture; the Convention is bilateral and continues to allocate taxing rights exactly as before.
The allocation itself is unchanged by the abolition. Immovable income stays taxable where the building stands under Article 6 of the Convention, and the French administration’s published doctrine confirms that the State of the source enjoys the prior taxing right over the residence State, a priority it exercises even without a local permanent establishment — see the French tax doctrine on immovable income under the France-United Kingdom treaty. The abolition changes how Britain measures the profit, not whether Britain may tax it. France therefore includes the cottage profit in worldwide income and then relieves the duplication through the Article 24 credit, computed as the French tax attributable to that profit and capped at the British tax actually paid. The practical effect of the abolition on the French side is indirect but real: a higher British profit raises the cap, while the French measure of the same cottage follows French furnished-letting rules that never knew the British holiday-let allowances, so the two figures diverge further than before and the credit computation needs exhibits on both sides.
Do not confuse this cottage with a French holiday flat. A French meublé de tourisme, a registered tourist furnishing, is defined by Article L. 324-1-1 of the Tourism Code: “les meublés de tourisme sont des villas, appartements ou studios meublés, à l’usage exclusif du locataire” That definition covers property let exclusively to passing guests staying by the day, week or month, and it drives French registration duties before a national teleservice and, since recent reforms, distinct tax thresholds. Your Cotswolds cottage is not a French meublé de tourisme and needs no French registration, no French change-of-use permission and no French tourist-tax collection; it is simply a foreign furnished letting taxable in France under the furnished-letting profit rules examined next. Keep the two vocabularies apart in correspondence with the inspector: the British abolition concerns the measurement of the British profit, while the French classification decides the French schedule.
II. How does France tax your British cottage as a furnished letting, and how do you eliminate the double bill?
A. Micro-BIC or régime réel: which French regime fits a former British holiday let?
France treats a furnished letting, wherever the building stands, as a business profit rather than property income. Article 34 of the General Tax Code provides: “Sont considérés comme bénéfices industriels et commerciaux, pour l’application de l’impôt sur le revenu, les bénéfices réalisés par des personnes physiques et provenant de l’exercice d’une profession commerciale, industrielle ou artisanale.” Furnished lettings fall within this bénéfices industriels et commerciaux (BIC), business-profits, category by settled case law and doctrine, which is why the cottage profit never enters the revenus fonciers, property-income, schedules that govern unfurnished lettings. Two regimes then compete, the micro-BIC, the simplified flat-allowance regime, and the régime réel, the actual-receipts-and-expenses regime. Article 50-0 of the General Tax Code sets the turnstiles: the simplified regime applies only where pre-tax turnover for the previous or penultimate calendar year stays within “203 100 € s’il s’agit d’entreprises dont le commerce principal est de vendre des marchandises, objets, fournitures et denrées à emporter ou à consommer sur place ou de fournir le logement, à l’exclusion de la location directe ou indirecte de locaux d’habitation meublés ou destinés à être loués meublés”, or “15 000 € s’il s’agit d’entreprises dont l’activité principale est de louer directement ou indirectement des meublés de tourisme, au sens du I de l’article L. 324-1-1 du code du tourisme, autres que ceux mentionnés aux 1° et 2° du I de l’article 1414 bis du présent code”, or “83 600 € s’il s’agit d’autres entreprises”. A Cotswolds cottage let to holidaymakers is neither a French meublé de tourisme in the registration sense nor a shop, so in practice it falls under the general 83,600 euro ceiling for other enterprises, comfortably met by most single cottages, while a portfolio of several British cottages must aggregate turnover across the activity before concluding.
The allowance then decides the economics. The same article continues: “Le résultat imposable, avant prise en compte des plus-values ou des moins-values provenant de la cession des biens affectés à l’exploitation, est égal au montant du chiffre d’affaires hors taxes diminué d’un abattement de 71 % pour le chiffre d’affaires provenant d’activités de la catégorie mentionnée au 1°, d’un abattement de 50 % pour le chiffre d’affaires provenant d’activités de la catégorie mentionnée au 2° et d’un abattement de 30 % pour le chiffre d’affaires provenant d’activités de la catégorie mentionnée au 1° bis.” Ordinary furnished lettings sit in the 50 percent allowance band, and the article adds that “Ces abattements ne peuvent être inférieurs à 305 €.” (Article 50-0 of the General Tax Code on Légifrance). For a cottage grossing the equivalent of 20,000 euros with 12,000 euros of agent fees, repairs, insurance, utilities and interest, the flat allowance leaves 10,000 euros taxable while actual accounting would leave about 8,000 euros, so the régime réel wins; in a year with almost no works, the allowance wins. The election deserves a three-year view because refurnishing cycles alternate heavy and light years, and because the British side no longer cushions heavy years with capital allowances. Under the régime réel, deduct each cost with invoices and bank traces, depreciate the fittings where French rules allow, and carry interest on the acquisition loan with a clean trace; drawings diverted to private spending will be stripped out. In practice the foreign furnished profit is reported through the foreign-income schedule (form 2047, the déclaration des revenus encaissés à l’étranger, the foreign-receipts schedule) feeding the business schedules and the main return (form 2042, the déclaration d’ensemble des revenus, the main income return), with the micro-BIC profit entered directly and the régime réel profit supported by its business statements. Convert currency consistently, pounds to euros at a single stated rate for gross and charges alike, and reconcile the resulting French BIC profit with the British property-business profit in the attached note: the two legitimately differ, since Britain now restricts interest to basic rate and grants only replacement relief while France depreciates and deducts under its own rules, and an unexplained gap invites reassessment.
The net then joins worldwide income at the progressive scale, whose bands run from 11 percent above 11,600 euros through 30, 41 and 45 percent thresholds for taxpayers covered by Article 4 B — see Article 197 of the General Tax Code on Légifrance. Social levies apply on top where the owner is affiliated in France, a point our companion unfurnished-lettings guide examines with its case law; the same affiliation logic governs the cottage, so a posting certificate or proof of compulsory United Kingdom affiliation must be attached expressly where an exemption is claimed rather than assumed. One transitional trap deserves emphasis: British losses generated under the old holiday-let ring-fence and carried into the amalgamated property business change the British bill for the following years, which in turn changes the cap of the French treaty credit year by year, so a credit computation copied from one year to the next without updating the British assessment is wrong by construction. Diary the British payment dates alongside the French assessment dates and recompute annually.
B. How does the treaty credit absorb the new British bill, and how do you challenge a refusal or a wrong figure?
The relief remains a French credit equal to the French tax attributable to the cottage profit, capped at the British tax proved as paid. Under Article 24 of the 2008 Convention, France as residence State allows against its tax a credit matching the French tax on income taxable in the United Kingdom. Concretely the inspector computes French tax on worldwide income including the cottage BIC profit, isolates the fraction corresponding to that profit, compares it with the British assessment and payment receipts, and grants the lower figure. Where the new, higher British effective rate exceeds the French rate on that slice, the surplus British tax stays unrelieved in France and only a British claim can address it; where the French rate exceeds the British rate, the credit neutralises the French tax on the slice without refunding any difference. The credit preserves progressivity: the cottage profit stays inside worldwide income for rate purposes and the credit subtracts the attributable tax afterwards, which is why the return must declare the full profit even though part of the resulting tax is later cancelled. A return that omits the cottage on the ground that HMRC has already taxed it forfeits the mechanism and looks like concealment; a return that declares fully and claims the precise credit invites correction, not penalty, if the figure needs adjustment.
The courts enforce the method strictly, and two recent Council of State decisions frame every challenge. In Conseil d’Etat, 9th-10th chambers combined, 10 July 2019, No. 412624, a French-resident taxpayer disputed how the administration had measured foreign-source income for the treaty credit, and the Council held that “pour déterminer le crédit d’impôt auquel ces revenus ouvraient droit conformément aux conventions fiscales bilatérales applicables, la cour n’a pas commis d’erreur de droit.” The lesson for the cottage owner is direct: the credit follows the French measure of the income with French adjustments applied consistently, so the gap between the new British property-business profit and the French BIC profit must be documented rather than wished away. In Conseil d’Etat, 12 February 2020, No. 435907, the question referred tested the treaty’s most sensitive sentence, the phrase beginning with les termes ” nonobstant toute autre disposition de la présente Convention ” employés au a) du 3 de l’article 24, asking how the credit formula preserves progressivity while taxing French-taxable income as if the other income were also taxable. The treatment confirms that Article 24 must be read whole: worldwide income is shown, the scale applies, and the credit then neutralises the attributable tax under ordinary-law conditions. For the abolition years this means showing the cottage profit gross of the credit in the worldwide total even where the credit wipes it out, and recomputing the ceiling each year as British losses, interest restriction and replacement relief reshape the British bill.
The challenge sequence, the recours, the remedy, mirrors any French income-tax dispute with two treaty-specific additions. First, correct early through a corrective return in the espace particulier or a written réclamation contentieuse, the formal tax claim, to the SIP that issued the assessment, attaching the British assessment, payment proof, NRL certificates, the property schedules, form 2047 and a credit computation that states the British profit, the French BIC profit and the reconciliation between them. Second, calendar protectively: the standard claim deadline runs to 31 December of the second year after the assessment year, but abolition cases straddle British and French tax years, so file once the French avis d’imposition, the tax bill, arrives rather than waiting for HMRC’s final reconciliation, and supplement later. Third, escalate in order through the hierarchical appeal to the SIP supervisor (recours hiérarchique), the departmental mediator where suitable, then the tribunal administratif, the administrative court, of the French home, with appeal to the cour administrative d’appel, the administrative court of appeal. Before the judge, prove three things in order: French residence with worldwide inclusion; prior British taxation of the same cottage profit as immovable income; and the arithmetical credit as the lower of British tax paid and French attributable tax. Most refused credits fail on proof, not principle: no British assessment produced, tax merely withheld but not finally assessed, or the full British payment claimed where the French attributable tax is lower. Frame the file as a calculation correction with exhibits and the inspector can concede without dispute; where the assessment double counts the cottage or denies any credit, the method decisions above supply the answer and interest falls with the principal once the credit is restored.
Conclusion
The April 2025 abolition ends the British holiday-let privilege but changes neither your French residence nor the treaty’s allocation: Britain still taxes the cottage first, now under ordinary property-business rules with restricted interest, replacement relief instead of capital allowances, amalgamated losses and no capital gains reliefs beyond the transitional tail, while France still taxes the same cottage as a furnished letting under BIC, micro-BIC within its ceilings with the flat allowance or actual accounting by election, and then credits the French tax attributable against your French bill. Declare the full cottage profit on forms 2047 and 2042 with its business schedules, reconcile the British and French measures to the pound, attach the British assessment and payment proof, compute the credit as the lower of the two taxes, and challenge quickly with exhibits when the credit is missing or short. Handled that way, the cottage survives its new tax life on both sides of the Channel.