UK Holiday Let Tax Guide 2026: What Owners Need to Know

Running a holiday let can be an excellent way to generate additional income while giving guests the opportunity to enjoy memorable stays in your property.

Whether you own a countryside cottage, a city apartment, or a coastal retreat, the UK holiday let market continues to offer exciting opportunities. 

However, following recent changes to UK holiday let tax rules, it is important for owners to understand how the latest holiday let tax changes could affect their property and profitability.

What is a Furnished Holiday Let?

A Furnished Holiday Let (FHL) was a special tax classification for qualifying holiday rental properties.

Before April 2025, holiday lets that met certain requirements could benefit from different tax rules compared with traditional long-term rental properties. These benefits helped many owners reinvest in their properties and grow their holiday let businesses.

To qualify as a Furnished Holiday Let, a property generally needed to:

• Be fully furnished and suitable for short stays
• Be available to rent for at least 210 days per year
• Be occupied by paying guests for at least 105 days per year
• Be operated with the intention of making a profit

The rules meant many holiday let owners were able to treat their property more like a business rather than a standard rental.

What changed to holiday let tax rules?

From April 2025, the Furnished Holiday Let tax regime was removed.

This major holiday let tax change means holiday lets are now treated the same as any other property income when it comes to taxation. The previous benefits linked specifically to FHL properties are no longer available post April 2025.

The main changes include:

Capital allowances

Previously, qualifying holiday let owners can claim capital allowances on certain items they purchased for their home, such as furniture, fixtures and equipment. Whilst some of these costs can no longer be claimed, if you are replacing existing domestic goods (e.g. furniture and white goods) you can still claim tax relief for the cost of the replacement. 

There was also an extra level of capital allowances that many owners were unaware of. Capital allowances were available on part of the original purchase price of the property or the refurbishment and construction costs.

Claiming capital allowances on the purchase, refurbishment or construction of a property used for short-term lets requires the skills of quantity surveyors and capital allowances specialists, it’s not a tax relief an accountant can claim.

The good news is that if you bought your property and started short-term letting before April 2025, you have until January 2027 to claim your capital allowances.

Mortgage interest

Holiday let owners now follow the standard property income rules for finance costs, including mortgage interest.

This means mortgage interest is treated differently compared with the previous Furnished Holiday Let rules. Tax relief is now restricted to 20% of the finance costs (e.g. 20% of the mortgage interest paid).

Capital Gains Tax benefits

Capital Gains Tax (CGT) advantages previously available to qualifying FHL properties have also been removed.

Pension contributions

Previously, profits from a qualifying FHL could count as relevant earnings for pension contribution purposes. This is no longer available under the updated rules.  

Sharing income between joint owners

Joint legal owners that are spouses or civil partners must now share profits equally.  Previously, the profits could be taxed on the lowest earner.

If this all seems like a bit of an information overload, there are resources like Zeal that can help you out with any tax-related confusion.

What do you pay for holiday let tax?

A common question from holiday let owners is: what do you pay for holiday let tax?

Holiday let owners generally pay tax on the profit they make from their rental income.

Taxable profit is usually calculated by taking your holiday let income and deducting allowable expenses. These may include costs such as:

• Cleaning and maintenance
• Repairs
• Insurance
• Utilities
• Marketing
• Professional fees
• Property management costs

The amount of tax you pay depends on your income, expenses and personal tax position.

Although the previous FHL tax advantages have changed, careful management of costs can still help owners run an efficient holiday let business.

How much tax is payable when buying a holiday let?

Another important consideration for new owners is: how much tax is payable when buying a holiday let?  This will be Stamp Duty Land Tax (SDLT) in England, Land & Buildings Transaction Tax (LBTT) in Scotland and Land Transaction tax (LTT) in Wales.  

The tax costs involved in buying a holiday let depend on factors including the property price, location, whether you already own another property and your personal circumstances.

If you are purchasing a holiday let as an additional property, you may need to pay higher rates of Land Tax . The amount depends on the purchase price and the current stamp duty rules in the country your property is situated.

There are generally very limited exclusions or reliefs from land taxes.  However, if you buy a property in England or Scotland that has restrictions on use as a holiday let only, the tax you pay on purchase may be less.

Other purchase costs to factor into your investment include:

• Mortgage costs (including arrangement fees)
• Legal fees
• Surveys
• Insurance
• Furnishing and renovation costs

Understanding these costs before purchasing can help you assess whether a holiday let is the right investment for you.

Are holiday lets still a good investment?

Yes, for many owners, holiday lets remain a strong opportunity.

While the tax advantages have changed, success in the holiday let market has always been about more than tax.

The best-performing properties focus on:

• Creating a great guest experience
• Maintaining strong reviews
• Keeping the property well presented
• Using effective pricing strategies
• Managing costs carefully

A holiday let is no longer just about having a property listed online. It is about creating a stay that guests remember and recommend.

What expenses can holiday let owners claim?

Although the FHL tax regime has ended, owners still need to understand the costs involved in running a holiday let.

Depending on your circumstances, some business expenses may still be considered allowable.

These can include:

Cleaning and maintenance

Keeping your property in great condition is essential for protecting your reviews and attracting future bookings.

Costs may include:

• Cleaning between stays
• Repairs
• Garden maintenance
• General upkeep

Property management

Many owners choose to work with a professional holiday let management company to handle the day-to-day running of their property.

This can include:

• Guest communication
• Booking management
• Cleaning coordination
• Ongoing support

Running costs

Holiday let owners may also need to consider expenses such as:

• Utilities
• Insurance
• Internet
• Guest supplies
• Marketing and professional support

How can holiday let owners maximise income in 2026?

The holiday let industry has become more competitive, and guests have higher expectations than ever.

The owners who perform best are those who treat their property like a hospitality business.

Improve your listing

First impressions matter.

Your photos, description and reviews all influence whether guests choose your property or continue searching.

Use smart pricing

Demand changes throughout the year.

Using the right pricing strategy helps you stay competitive while making the most of busy periods.

Focus on guest experience

Great reviews come from great stays.

Simple things such as clear communication, a smooth check-in process and a well-maintained property can make a big difference.

Look after your investment

Regular maintenance and proactive management help protect your property and prevent small issues becoming bigger problems.

How Pass the Keys helps holiday let owners

Managing a holiday let can be time-consuming.

From responding to guests and organising cleaning to improving your listing and maximising bookings, there are many moving parts involved in running a successful property.

At Pass the Keys, we help homeowners make the most of their holiday lets through:

• Professional listing optimisation
• Guest communication
• Booking management
• Cleaning and maintenance coordination
• Pricing support
• Local property expertise

Whether you are new to holiday letting or already have an established property, our team can help you create a smoother, more successful hosting experience.

Need help? We have the UK’s leading short-term let tax specialists on hand to help you

Pass the Keys partners with Zeal Tax, a UK leading tax consultancy for short-term lets.  As a host with Pass the Keys, you get access to a free tax helpline with Zeal and access to their resource hub, which includes a range of tax guides and blogs for short-term let owners.

Access the resource hub here

Contact Zeal’s free helpline on 01633 492813 or via email at ptk@gozeal.co.uk

Quote from Matt Jeffery ATT CTA, Head of Tax at Zeal

"Zeal have helped short-term let owners save millions of pounds in UK tax by ensuring owners have claimed all the tax reliefs available to short-term lets and have a business structured tax efficiently. 

We've been helping Pass the Keys hosts save on tax for 3 years now, and it’s never been more important to discuss your property business with one of our tax specialists."

Don’t miss out by paying too much tax - just ask Zeal for help.