Furnished Rental Tax Regimes: Europe's Quietest Tax Shields (2026)

Published on: June 14, 2026

Quick answer: In much of Europe, "furnished" is a tax category in its own right, often more favourable than bare letting. France's LMNP régime réel can depreciate the building and shelter rental income to near zero (though, since 2025, the depreciation is clawed back at sale). Italy's cedolare secca replaces progressive tax with a flat 21% on long lets. And the UK's Furnished Holiday Let shield was switched off entirely in April 2025. The lesson: opt into the right sub-regime, and build a plan that survives the regime changing.

Most articles about furnished and short-term lets focus on regulation: Airbnb caps, registration rules, the "anti-tourist-rental" backlash. That is a real topic, but it is not this one. Underneath the headlines about night limits sits a completely separate world, the tax treatment of furnished letting, and it contains some of the quietest, most powerful shields in European property. It also contains traps, and several of them sprang shut in 2025 and 2026. (For the regulatory side, see our short-term rental investment guide.)

Here is how three of the most important furnished-rental regimes actually work, told neutrally and with the recent changes flagged. This is general information, not advice, the qualifying conditions for each are detailed and easy to get wrong.

France, LMNP: the depreciation shield (and its 2025 catch)

France treats furnished letting (location meublée) differently from bare letting, and the non-professional version, LMNP (loueur meublé non professionnel), has long been one of Europe's most effective shields. Choose the régime réel (real-expenses regime) over the simplified micro-BIC allowance, and you can deduct actual costs and depreciate the building, fixtures and furniture. Buildings are written down over decades (commonly 1–2.5% of value a year), and that depreciation can, in many cases, reduce taxable rental income to near zero for a number of years, depending on the property, costs and your circumstances.

That was the appeal: paper losses from depreciation sheltered real rental cash. The 2025 catch changed the long game. Under the Finance Law for 2025, depreciation deducted during ownership is now added back into the capital-gains calculation when the property is sold (for income from 2025, declared in 2026). In plain terms: the shield that protected your annual income now increases your taxable gain at exit. The benefit didn't vanish, it moved from "free" to "deferred," and the shorter your hold and the larger your gain, the more it bites. For LMNP investors, exit planning suddenly matters as much as the yearly tax saving.

Short-term meublé de tourisme letting has its own moving parts too: the micro-BIC allowances and turnover ceilings were tightened from 2025, and classified tourist accommodation retains more favourable treatment than unclassified, so classification has become a deliberate tax lever.

Italy, cedolare secca: the flat-rate shortcut

Italy's offering is the opposite philosophy: not a shield built from deductions, but a clean flat substitute tax. Electing cedolare secca replaces the ordinary progressive income tax (IRPEF, which runs 23–43%) on residential rental income with a single flat rate, and, helpfully, generally keeps the rent off the progressive scale and typically avoids certain social contributions that French and Spanish landlords can face, though treatment depends on your residency and circumstances.

The rates as of 2026:

• Long-term residential lets: 21% flat.
• Short lets: 21% on the first property, then 26% from the second, a tiered structure in force since 2024.
• From the third short-let property, the activity is generally treated as a business, with ordinary income tax and VAT registration typically applying (verify the exact threshold against the enacted 2026 law).

For many foreign owners of a single Italian property, the practical effect of the 2026 change is limited. The 21%/26% tiering is older (it dates from the 2024 Budget Law), and the 21% rate is preserved, with cedolare secca often simpler than ordinary IRPEF, though whether it is the better choice depends on your income and deductible costs. The genuine 2026 change is narrower: letting is now presumed an entrepreneurial activity (mandatory VAT, ordinary taxation) from the third property, down from the previous fifth-property threshold, so the tightening is aimed at portfolio operators, not the second-home buyer. (You will need an Italian tax code, codice fiscale, to elect it, and the election is made annually on the Italian return.)

United Kingdom, Furnished Holiday Lets: a shield that was switched off

The UK belongs in this article precisely because of what it removed. For decades, a property meeting the Furnished Holiday Let (FHL) tests, broadly, furnished, available for short-term letting for a set number of days, and actually let for a minimum, was treated almost like a trading business rather than an ordinary rental. That brought real advantages: full mortgage-interest deductibility (escaping the Section 24 restriction that hits normal landlords), capital allowances on furnishings, and access to certain business-asset reliefs.

That regime was abolished from 6 April 2025. Former FHL properties are now treated as ordinary residential lettings: they fall under Section 24's 20%-credit interest restriction, lose the capital allowances, and drop the business reliefs. A widely used shield was switched off, and owners who built a holiday-let strategy around it have had to rethink the numbers. It is a reminder that these regimes are policy choices, not permanent fixtures, they can be withdrawn with a single budget.

The pattern across the three

Two lessons stand out. First, "furnished" is a tax category in its own right in much of Europe, often more favourable than bare letting, but you have to opt into the right sub-regime and meet its conditions. Second, the benefit can move or disappear: France relocated its shield to the exit, the UK removed its entirely. Build a plan that survives the regime changing, not one that depends on it staying still.

Frequently asked questions

What is France's LMNP regime?
LMNP is the non-professional furnished-landlord status. Under the régime réel it lets you deduct actual expenses and depreciate the property, often reducing taxable rental income to near zero. Since the 2025 Finance Law, that depreciation is added back when calculating the capital gain at sale.

What is Italy's cedolare secca and what does it cost in 2026?
It is an optional flat substitute tax on residential rental income, replacing progressive IRPEF. It is 21% for long-term lets, 21% on the first short-let property and 26% from the second (a tiering in force since the 2024 Budget Law). The 2026 change is narrower: portfolio operators are now presumed to be running a business (ordinary taxation and VAT) from the third property, down from the previous fifth-property threshold.

Did the UK abolish the Furnished Holiday Let regime?
Yes, from 6 April 2025. Former FHL properties are now taxed as ordinary residential lettings, losing full mortgage-interest relief, capital allowances and certain business reliefs.

Is furnished letting more tax-efficient than unfurnished?
Often, in countries that give furnished letting its own regime (France, Italy), but only if you elect the right option and meet the conditions, and only after accounting for changes like France's depreciation clawback. It is not automatic, and the rules shift.

Find the market that fits the strategy

A favourable furnished regime only helps if the underlying rental works. Compare prices, yields and the cross-border rules across 50+ countries on JanusHermes before you commit, then confirm the tax election with a local adviser.

JanusHermes is a property-search and listings platform. This article is general educational information as of mid-2026 and is not tax, legal or financial advice. The qualifying conditions, rates and reliefs for each regime are detailed, depend on your residency and circumstances, and change frequently. Confirm your position with a tax adviser licensed in the relevant country before relying on any of it.

A note on the numbers: where no source is named, the market figures in this article (prices, yields, costs) are indicative estimates compiled from publicly available market data and industry reporting at the time of writing. Markets move and rules change, so treat them as a starting point and verify current figures with official sources before acting on them.