Are you looking for important information about holiday home tax? In this blog, we highlight the tax implications of owning and running a holiday let, the abolition of the Furnished Holiday Let (FHL) scheme, and tax allowances you can still take advantage of.
Read on for a full understanding of holiday let tax, including stamp duty, business rates, council tax, HMRC tax returns and more.
Our guide to holiday home tax
Welcome to our complete guide to holiday home tax. Read on for a full breakdown, or use the quick links to navigate to a particular topic.
- Furnished Holiday Let tax changes
- Stamp duty for holiday lets
- Holiday let council tax vs business rates
- Tax considerations when selling your holiday home
- Holiday let tax advantages
- Holiday let tax returns
- Let your cottage with Helpful Holidays
Furnished Holiday Let tax changes
In April 2025, the Furnished Holiday Let (FHL) tax relief regime was abolished for individuals, companies, and trusts operating a qualifying FHL business.
As a result, the previous tax benefits associated with qualifying FHLs no longer apply, and FHLs are taxed in the same way as long-term residential or commercial lets.
It’s worth bearing in mind the following about changes to FHL tax:
- New holiday let owners can benefit from FHL tax advantages if their property was ready before 1st April 2025 and meets the letting days criteria in the 12 months after it was first made available for let
- Apart from the changes to capital allowances and finance interest costs, there will be no changes to how you calculate your taxable profits. Cleaning, maintenance, welcome packs, etc. will still be tax-deductible
Read the section on holiday let tax benefits to learn about the old FHL scheme’s advantages, and which tax allowances still apply to holiday lets.
For more up-to-date information on Furnished Holiday Let tax changes, read our parent company, Sykes Holiday Cottages’ guide.
Stamp duty for holiday lets
You’ve decided to buy a holiday let, but are unsure of what taxes might apply. The first tax you’re likely to encounter is Stamp Duty Land Tax (SDLT) for your holiday let.
Stamp Duty Land Tax (SDLT) is paid when you buy a property or land over a certain threshold in England and Northern Ireland.
You pay the SDLT when you meet the following criteria:
- You buy a freehold property
- You are buying a new or existing leasehold property
- You are buying a property through a shared ownership scheme
- You are transferring land or property in exchange for payment (e.g. you take on a mortgage or buy a share in a house)
In Wales, this tax is known as Land Transaction Tax (LTT) and in Scotland, this is known as Land and Buildings Transaction Tax (LBTT).
The amount of Stamp Duty Land Tax (SDLT) you pay depends on the property’s purchase price. SDLT is charged in bands, with different rates applied to the portion of the price that falls within each band. As of April 2025, if the property is worth less than £125,000, you won’t need to pay any SDLT.
The current rates for buying a single residential property are shown below:
| Property or lease premium or transfer value | SDLT rate |
| Up to £125,000 | Zero |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Additional surcharges apply if the buyer or their spouse owns another residential property. This surcharge is an additional 5% on top of the standard SDLT, and often applies to those who are buying a holiday let.
Amended rates for buying an additional property, with the surcharge included, are shown below:
| Property or lease premium or transfer value | SDLT rate |
| Up to £125,000 | 5% |
| The next £125,000 (the portion from £125,001 to £250,000) | 7% |
| The next £675,000 (the portion from £250,001 to £925,000) | 10% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 15% |
| The remaining amount (the portion above £1.5 million) | 17% |
If you are a limited company you will also pay the 5% surcharge, even if the purchase is the only residential property the company will own. If one of the purchasers is a non-UK resident then there may be a further 2% surcharge as well.
We suggest getting specialist advice if you are purchasing more than one dwelling as part of the transaction, the property you are buying is not entirely residential, or the property was previously used as a holiday let only or was uninhabitable when purchased. For more details, visit HMRC’s Stamp Duty page.
Holiday let council tax vs business rates
If your holiday let qualifies for business rates instead of council tax, you could pay significantly less, especially if you’re eligible for Small Business Rate Relief.
In England, Scotland and Northern Ireland, a holiday let is assessed for business rates (rather than council tax) if it:
- Is available for commercial holiday letting for at least 140 days in the next 12 months, and
- Was actually let for at least 70 days in the previous 12 months.
If your property doesn’t meet these criteria, you’ll pay council tax instead.
This matters because council tax can be considerably more expensive. In Devon, for example, second homes that aren’t business-rated may be subject to a 100% council tax premium, effectively doubling the standard bill, depending on the local authority.
If your holiday home does qualify for business rates and its rateable value is under £15,000, you may also be eligible for Small Business Rate Relief, which can reduce your bill to zero in some cases.
Find out more about small business rate relief or read our business rates vs council tax blog for more detail.
Tax when selling a holiday home
If you decide to sell your holiday home, then you will need to pay Capital Gains Tax (CGT). The current CGT for residential properties is 18%, or 24% if you pay a higher rate of tax.
If you choose to gift a holiday let to the next generation, in most cases this will be treated as a disposal at market value for Capital Gains Tax (CGT) purposes—meaning you may owe CGT as if the property had been sold.
Previously, furnished holiday lets qualified for CGT reliefs such as Hold-Over Relief and Roll-Over Relief, which allowed the gain to be deferred in certain situations. However, since the FHL tax regime was abolished in April 2025, these reliefs are no longer automatically available.
Unfortunately, if the holiday let owner dies, the property will typically not qualify for Inheritance Tax (IHT) relief. Its full market value will usually form part of the deceased’s taxable estate. The current standard rate of IHT is 40%. Learn more about inheritance tax on the Government website.
Holiday let tax advantages
Previous tax benefits of the FHL scheme
Until April 2025, the Furnished Holiday Lettings (FHL) regime provided several tax advantages for qualifying properties. These benefits included:
- Capital allowances: Owners could claim allowances on items like furniture, equipment, and certain fixtures, reducing taxable profits.
- Mortgage Interest Relief: Full deduction of mortgage interest from rental income was permitted.
- Capital Gains Tax (CGT) Reliefs: Options included Business Asset Disposal Relief, Rollover Relief and Hold-Over Relief.
- Pension contributions: Furnished holiday let profits were considered ‘relevant earnings’, enabling tax-advantaged pension contributions
- Flexible profit sharing: Joint owners could allocate profits in proportions different from ownership shares.
Since the FHL regime was abolished in April 2025, these specific tax benefits no longer apply.
Remaining holiday let tax advantages
Despite the removal of the FHL scheme, there are still certain tax advantages that holiday let owners can access. These include:
- Allowable Expenses: Costs such as utilities, maintenance, insurance, and advertising can be deducted from rental income, provided they are incurred wholly and exclusively for the rental business.
- Replacement of Domestic Items Relief: Tax relief is available for replacing items like furniture and appliances, but not for initial purchases.
- Business Rates and Reliefs: Properties available to let for at least 140 days and actually let for 70 days in a year may be assessed for business rates instead of council tax. If the property’s rateable value is below £15,000, owners might qualify for Small Business Rate Relief, potentially reducing the business rates bill significantly.
It’s advisable to consult with a tax professional to understand how these changes affect your specific circumstances and to ensure compliance with current regulations. You can also find more in Sykes Holiday Cottages’ up-to-date guide to FHL tax.
Don’t forget: You can still claim capital allowances for a previous FHL
If your property qualified as a Furnished Holiday Let during the 2024–25 tax year, you can still claim capital allowances for any eligible costs incurred before 6 April 2025.
These claims can be made on your 2024–25 tax return, which must be submitted by 31 January 2026 (if filing online). You may also amend this return up to 31 January 2027.
Capital allowances can be complex to calculate—especially for embedded fixtures like heating and plumbing—so it’s a good idea to speak to a specialist tax adviser like Zeal Tax.
Holiday let tax returns
Even though the Furnished Holiday Let (FHL) tax regime ended in April 2025, you still need to report income from your holiday home to HMRC. This is done through the Self Assessment system, and you’ll be taxed in the same way as a standard residential landlord.
Your taxable profits are calculated as your rental income minus allowable expenses.
Examples of allowable costs include:
- Letting agency fees
- Advertising and marketing
- Repairs and maintenance
- Cleaning and utilities
- Insurance
- Accountant fees
- Business rates
- A portion of travel costs
- Mortgage interest (now subject to a 20% tax credit rather than full deduction)
You can’t claim capital allowances for new purchases from April 2025 onwards, but Replacement of Domestic Items Relief allows you to claim tax relief on replacing furnishings and appliances.
To find out more, visit the HMRC website or view Zeal Tax’s guide to holiday let allowable expenses.
Key Tax Deadlines
- 5 October: Deadline to register for Self Assessment if you’re new to letting
- 31 October: Deadline for paper tax returns
- 31 January: Deadline for online tax returns and for paying your tax
- 31 July: Payment on account deadline (advance payments towards next year’s tax)
In your first year, you may need to pay a larger amount, which includes both the balance for the previous tax year and a payment on account for the year ahead.
VAT for holiday lets
If your holiday letting business has a turnover above £90,000 (as of April 2024), you’ll need to register for VAT. This means:
- You must charge VAT on your rental income
- You can reclaim VAT on eligible expenses
VAT registration is complex, so seek advice before registering.
For more information, visit the government website.
Let your cottage with Helpful Holidays
Helpful Holidays has over 40 years’ experience in managing holiday lets across the South West. This means our team know a thing or two about helping you get the most from your holiday property.
If you’d like to read more about letting your holiday home, check out our owner advice blog.
Here, we’ve put together countless holiday letting guides on a range of subjects, including:
- Holiday let money saving tips
- Health and safety regulations for holiday lets
- How to start a glamping business
- Choosing a South West holiday letting agency
To learn more about letting with Helpful Holidays, complete the form below. Our team will be in touch to answer any questions, and you’ll receive a copy of our FREE Owner Guide.
Please note:
The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard.
If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA.
As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.