Short-term letting in Cambridge has grown rapidly over recent years, especially in areas close to the historic colleges, biomedical campuses, and the railway station. As more homeowners and investors turn to Airbnb and other short-let platforms, one of the most common questions is:
“Can I deduct mortgage interest from my Airbnb income?”
The short answer: Yes – in most cases, you can deduct mortgage interest if your Cambridge property is a qualifying furnished holiday let (FHL).
However, the rules differ depending on whether your property does or does not qualify as an FHL, and mortgage interest relief does not work the same way for ordinary long-term residential lets.
Below is the full breakdown of the rules, what Cambridge hosts need to know, and how to stay compliant.
In the UK, your Airbnb/short-let property in Cambridge will fall into one of the two categories for tax purposes:
If your Cambridge property meets HMRC’s criteria for a furnished holiday let, it is treated like a business rather than a standard rental.
FHL status allows you to deduct 100% of mortgage interest as an allowable business expense.
Be available to let for 210 days a year
Be actually let for at least 105 days a year
Not be occupied long-term (no more than 31 days per stay)
Be fully furnished
If you meet these rules, HMRC classifies the property as an FHL, giving significant tax advantages — including full mortgage interest relief.
If your property doesn’t meet FHL rules, it is treated as a normal rental for tax purposes.
Under current UK rules:
❌ You cannot deduct mortgage interest directly from your rental profits.
✔ Instead, you receive a 20% tax credit on your mortgage interest payments.
This is less beneficial for higher-rate and additional-rate taxpayers.
You can deduct all mortgage interest when calculating your taxable profit.
You can still claim mortgage interest relief, but only at 20%.
Cambridge hosts should therefore aim to meet the FHL criteria where commercially possible, as the tax treatment is significantly more favourable.
You can normally deduct:
Interest on your property mortgage
Interest on loans used for refurbishment or improvements
Interest on loans used to purchase furniture or equipment
Interest on loans used to expand the short-let business
You cannot deduct:
Capital repayments
Fees for late payments
Mortgage arrangement fees (these are separate allowable expenses, but not “interest”)
To stay compliant, hosts should maintain:
Annual mortgage statements
Bank statements showing interest payments
Booking records to evidence the 105-day letting threshold
Availability calendars proving 210+ days open to guests
Receipts for all related loans and renovations
Good records reduce the risk of HMRC queries and support FHL qualification.
If your Airbnb property in Cambridge qualifies as a furnished holiday let, you may also benefit from:
You can claim tax relief on furniture, appliances, and equipment.
Many Cambridge short-lets are eligible, often with small business rate relief.
Allowing you to contribute more to your pension.
Such as Business Asset Disposal Relief (BADR) and rollover relief when selling or reinvesting.
These incentives make FHL status particularly valuable in high-demand cities like Cambridge.
No. FHL rules apply regardless of where you live.
You might be able to use the “averaging election” (if you own multiple FHLs) or a “period of grace election” to temporarily retain FHL status.
Yes, based on the proportion used exclusively as a holiday let. Personal use reduces allowable deduction.
Tax rules and planning rules are separate. Even if planning permission becomes required, it does not directly affect tax status.
Registration or licensing does not alter mortgage interest rules — but may affect whether you can continue operating as an FHL (availability and letting thresholds).
Yes — companies can generally deduct mortgage interest in full as a business expense, but you should seek tax advice to compare personal vs. corporate ownership.
Understanding mortgage interest deductions — and whether your property can qualify as an FHL — is essential for maximising profits from your Airbnb in Cambridge. With upcoming changes in national short-let regulation and increasing scrutiny on compliance, staying up-to-date is more important than ever.
Pass the Keys Cambridge provides full management and compliance support, including:
Tracking your occupancy to help you meet FHL thresholds
Managing booking calendars to maintain 210+ available days
Keeping records that support tax claims and HMRC compliance
Assisting with documentation for business rates
Ensuring your property meets safety, operational, and regulatory standards
Maximising occupancy, revenue and guest satisfaction year-round
With professional support, Cambridge hosts can confidently meet HMRC requirements, optimise tax efficiency, and maintain a fully compliant, profitable short-let business.