What happened to the furnished holiday let tax rules?
The special furnished holiday let (FHL) regime was abolished from 6 April 2025 (5 April for corporation tax). Holiday lets now sit within ordinary property income rules. In practice:
- Individual owners can no longer deduct mortgage interest in full. They receive a basic-rate tax credit instead, rising to 22% from April 2027.
- Capital allowances are not available on new spending on furniture and fittings, though existing pools can continue.
- Business asset disposal relief and other capital gains reliefs no longer apply in the usual way.
- Profits no longer count as relevant earnings for pension contributions.
From April 2027, individuals will also pay separate property income tax rates of 22%, 42% and 47%.
Do lenders still offer holiday-let mortgages?
Yes. The tax change did not affect lender appetite in the same way. Many building societies and specialist lenders continue to offer holiday-let mortgages, typically up to 75% of value.
The key difference from standard buy-to-let is how rent is assessed. Lenders usually ask a holiday-let specialist agent for projected low, mid and high season weekly rents, then take an average. That figure is tested against a stressed rate, similar to buy-to-let ICR.
Can I use the property myself?
Most lenders allow some personal use, often a few weeks a year. Limits vary, so check before you buy if family use is part of the plan. Heavy personal use may mean you need a second-home mortgage instead, assessed on your income.
Most lenders also expect the property to be marketed through a recognised agent or platform, with rental income paid into an account you can evidence. Keep booking records, as lenders may ask for them when you remortgage.
What makes a holiday let lendable?
Lenders favour properties in established tourist areas with proven demand. They will look at the property's condition, access, and whether it is suitable for year-round letting. Unusual properties, such as lodges on holiday parks or properties with occupancy restrictions, have a smaller lender pool.
Many lenders also want borrowers to have a minimum personal income and to own their own home. Some accept first-time landlords; others require landlord experience. Your existing credit commitments are taken into account.
What other costs should I factor in?
- Stamp duty: the 5% surcharge applies to additional homes in England.
- Council tax or business rates: in England, a holiday let must be available for 140 days and actually let for 70 days to be rated for business rates. Otherwise council tax applies, and councils may charge second-home premiums.
- Wales: stricter letting thresholds and higher local premiums apply.
- Local rules: some areas are introducing registration or planning controls on short-term lets.
- Running costs: cleaning, changeovers, platform fees, furnishing and insurance.
Is personal name or a company better now?
With FHL gone, holiday lets follow the same logic as other rental property. Higher-rate taxpayers with significant borrowing may find a limited company more tax-efficient. Fewer lenders offer holiday lets to companies, so product choice is narrower. Speak to an accountant first.
How the numbers compare with a long let
Holiday lets can earn more gross income than a long let, but costs are much higher. Cleaning, changeovers, platform commission, utilities, furnishing and marketing can take a large share of income. Occupancy also varies year to year. Since the FHL changes, the after-tax gap has narrowed further. Model both options before you buy.
Should I consider a long let instead?
Some owners now switch between holiday and long lets depending on demand. That flexibility depends on your mortgage, as most holiday-let and buy-to-let products allow only one type of letting. Switching later may need lender consent or a new product. Tell your broker your plans at the start, so the mortgage fits how you will use the property.
A holiday-let buyer's checklist
- Get a projection from a reputable local holiday-let agent.
- Check occupancy history if the property already trades.
- Confirm business rates eligibility and local council premiums.
- Check planning and any short-term let restrictions.
- Model your tax position under 2027 rates.
- Agree personal-use limits with your lender.
Holiday-let mortgages for investment are generally not regulated by the FCA. A holiday let is secured lending and may be repossessed if repayments are not kept up.
Holiday let mortgagesMortgages for short-term and holiday lets, including furnished cottages and city serviced lets.
Explore holiday let mortgagesFrequently asked questions
Has the furnished holiday let regime been abolished?
Yes. From April 2025, the FHL tax regime ended. Holiday lets are now taxed under the same rules as other residential lettings, so individual owners only get a tax credit on mortgage interest and lose several capital gains and capital allowance advantages.
How do lenders calculate holiday-let affordability?
Most lenders use a letting agent's projection of low, mid and high season weekly rents, averaged to an annual figure. This is then tested against a stressed interest rate. Some lenders also require minimum personal income. Mortgage payments still fall due in quieter months.
Can I buy a holiday let with a buy-to-let mortgage?
Usually not. Standard buy-to-let mortgages require an assured shorthold or periodic tenancy. Short-term lets need a specific holiday-let mortgage or lender consent. Using a buy-to-let mortgage for holiday letting without permission could breach your mortgage terms. A holiday-let mortgage is designed for short-term lettings and assesses income on seasonal rents.
How many weeks can I use my holiday let?
It depends on the lender. Many allow a limited number of weeks of personal or family use each year. If you want regular personal use, a second-home mortgage may suit better. Make sure your plans match the lender's terms before you complete.
Do holiday lets need EPC C by 2030?
The confirmed EPC C requirement applies to private rented homes let on tenancies. Genuine short holiday lets are generally treated differently, but rules can change, so check the latest guidance for your property. Better efficiency can also lower running costs and appeal to guests.
Do holiday lets pay business rates or council tax?
In England, a holiday let pays business rates if it is available for at least 140 days and actually let for at least 70 days a year. Otherwise it pays council tax, possibly with a second-home premium. Wales has stricter thresholds.
Important: This guide is general information, not personal advice. Rules, rates and lender criteria change; speak to an adviser about your circumstances. Your home may be repossessed if you do not keep up repayments on your mortgage.