Holiday lets are still a valid investment, but after this week's Budget the numbers need to stand up on their own. Lenders are now looking for professional, well-planned cases rather than tax-driven ones.
What the Budget means for holiday let owners
The special furnished holiday lettings (FHL) tax regime ended in April 2025, so holiday let profits are now taxed in broadly the same way as other rental income. That matters because the 28 October Budget announced that tax on property income will rise again from April 2027, to 24% for basic-rate, 44% for higher-rate and 49% for additional-rate taxpayers (Simply Business, 28 October 2026).
For owners holding holiday lets in their own name, that means less profit after tax from the same bookings. It is a good moment to review cash flow, ownership structure and your borrowing before the new rates arrive. Speak to your accountant about the tax side; we can help with the mortgage side.
What lenders want to see now
Writing in The Intermediary on 26 October 2026, specialist lender Foundation said demand for holiday let finance is steady, with applications up slightly over the past year. Much of that demand now comes from experienced landlords buying in areas with proven, year-round demand, often to diversify away from standard buy-to-let after the Renters' Rights reforms or to target stronger yields.
Foundation also noted that casual investors who bought mainly for the old FHL tax advantages are reassessing, and expects the sector to become more professional. Some lenders assess affordability using seasonal income patterns rather than a standard tenancy rent, and look at each case on its merits.
In practice, that means a lender will want to understand:
- Projected letting income, usually backed by a letting agent's or holiday cottage company's forecast for high, mid and low season.
- Your experience as a landlord and how the property will be managed.
- Location: year-round demand counts for more than a short summer peak.
- Any local restrictions, such as planning conditions or occupancy limits.
Switching between holiday let and buy-to-let
Some owners are moving holiday lets to long-term tenancies, and some landlords are doing the reverse. Either way, check your mortgage terms first: a standard buy-to-let mortgage usually does not allow holiday letting, and a holiday let mortgage may have conditions on how the property is used. Changing use without telling your lender could breach your mortgage terms.
Quick tips
- Get a seasonal income forecast from a local holiday letting agent before you apply.
- Stress-test your cash flow at the new 2027 property income tax rates.
- Check council tax and business rates rules with your local authority, as premiums on second homes vary by area.
- Start early if your current deal ends in the next six months; specialist cases can take longer.
- Keep your paperwork together: booking history, management agreement and portfolio schedule.
Most holiday let mortgages are not regulated by the Financial Conduct Authority.
Thinking of buying, refinancing or switching a holiday let? See our holiday let mortgages page, read how we helped a landlord in our Norfolk BTL-to-holiday-let switch case study, or download the free HMO and holiday let mortgages guide. Our CeMAP-qualified advisers can compare options from specialist holiday let lenders for you.
Sources
- The Intermediary – Holiday lets: An evolving market (26 October 2026)
- Simply Business – Autumn Budget 2026: key takeaways for landlords (28 October 2026)
- House of Commons Library – Changes to the Furnished Holiday Lettings tax regime
To talk it through, contact us or start your enquiry.
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.