The 2004–05 season saw a continuation of the good form of the end of the previous season, with the club well in the upper half of the Championship at the end of September. However, a long run of poor form subsequently saw the club drop steadily towards the relegation zone. Another good cup run further eased the club's financial position, with the team reaching the semi-final of the League Cup, soundly beating Premiership sides Portsmouth and Southampton on the way, before losing narrowly to Liverpool. The club's poor league form, however, came to a head in March, with a run of terrible performances and Lewington was sacked on 22 March. His sacking was controversial, and many fans were unhappy at the loss of a man who had led the club to two cup semi-finals in three seasons, enduring considerable financial hardships.
At the age of 34, Aidy Boothroyd was appointed manager of Watford after serving at Leeds United as a coach; 70-year-old Keith Burkinshaw was recruited as his assistant. Boothroyd's inexperience raised concerns among fans, who worried that he would not be able to keep the side in the Championship. However, Watford secured enough points to ensure survival with two games to go in the season.