Last Updated May 2026
A holiday let mortgage is a specialist loan for a property you intend to rent out on a short-term basis to holidaymakers, rather than under a standard assured shorthold tenancy. These products are used because lenders assess income from holiday lets differently from standard buy-to-let income — projected seasonal earnings, occupancy rates, and void periods all factor into the underwriting.
2026 is a significant year for this market. The Furnished Holiday Let tax regime was abolished on 6 April 2025, removing tax advantages that many investors had relied on. The UK government is also introducing a mandatory national registration scheme for short-term lets in England — as at May 2026, GOV.UK states that the scheme is not yet in force and is expected to begin in 2026. And lender criteria have evolved in response to both regulatory change and shifting occupancy patterns in some tourist markets. If you are considering buying a holiday let, or already own one and are coming off a fixed rate, the landscape is materially different from two years ago.
This guide explains how holiday let mortgages work in 2026, what lenders require, the tax position post-FHL abolition, the expected registration obligations, and what the numbers look like in practice.
At a Glance
| What you need to know |
| Holiday let mortgages are distinct from buy-to-let mortgages. Lenders assess projected seasonal rental income, not a fixed monthly tenancy. Different underwriting, different product range. |
| Many holiday let lenders require deposits from around 25%, although requirements vary by lender, property, borrower profile and location. |
| The Furnished Holiday Let (FHL) tax regime was abolished on 6 April 2025. For many individual owners, holiday let income is now generally taxed under the usual residential property income rules, rather than the former FHL regime. For individual owners, mortgage interest relief is generally restricted to a 20% basic-rate tax credit, broadly in line with standard buy-to-let. Company ownership is treated differently. Tax treatment depends on ownership structure and circumstances — specialist tax advice is essential. |
| A mandatory national short-term let registration scheme for England is expected to begin in 2026. As at May 2026, GOV.UK states the scheme is not yet in force. Scotland, Wales, and Northern Ireland have separate frameworks. |
| Holiday let mortgage rates are generally higher than standard residential rates and broadly in line with, or slightly above, standard buy-to-let rates, reflecting the more specialist nature of the product. |
| A specialist broker is particularly useful here. Some lenders in this market are building societies or specialist lenders, and some products may be available only through intermediaries. |
What Is a Holiday Let Mortgage?
A holiday let mortgage is a specific type of secured loan for a property that will be rented out to guests on a short-term basis — typically through platforms such as Airbnb, Vrbo, Booking.com, or through a specialist holiday letting agency. The property is not covered by a standard buy-to-let mortgage because the letting arrangement differs materially: no assured shorthold tenancy, no fixed monthly rent, and significantly more variable income across seasons.
Lenders who offer holiday let products underwrite the application differently. Rather than assessing a fixed monthly rent against the mortgage payment, they look at projected annual rental income across peak, mid, and low seasons — often using a rental projection from a specialist letting agent or RICS-qualified valuer — and apply a stress test to the blended annual figure.
The product is unregulated in most cases, because the property is not the borrower’s primary residence. This means different rules apply compared to residential mortgages — fewer FCA disclosure requirements, and different lender criteria across the market.
The FHL Abolition: What Changed on 6 April 2025
⚠ Important: The Furnished Holiday Let tax regime was abolished from 6 April 2025. Information referencing FHL tax advantages that applied before this date is no longer current.
Until April 2025, properties that qualified as Furnished Holiday Lets under HMRC rules received specific tax advantages: full mortgage interest deductibility against rental income (rather than the basic rate credit restriction that applies to standard buy-to-let), access to capital allowances on furnishings and equipment, and eligibility for certain Capital Gains Tax reliefs including Business Asset Disposal Relief.
From 6 April 2025, those advantages no longer apply. For many individual owners, holiday let income is now generally taxed under the usual residential property income rules, rather than the former FHL regime. Tax treatment depends on ownership structure and circumstances — specialist tax advice is essential.
| Tax treatment | Before 6 April 2025 (FHL regime) | From 6 April 2025 (current position) |
| Mortgage interest relief | Full deduction against rental income for higher-rate taxpayers | For individual owners, generally restricted to a basic rate tax credit (20%) — broadly in line with standard buy-to-let. Company ownership treated differently — take specialist tax advice. |
| Capital allowances on furniture | Available | No longer available for new expenditure |
| Capital Gains Tax reliefs | Business Asset Disposal Relief and Rollover Relief potentially available | No longer available — standard CGT rules apply |
| Loss offsetting | Holiday let losses could be offset against other income in certain circumstances | Standard property income rules apply |
| Pension contribution qualifying income | Holiday let profits counted as relevant UK earnings | No longer counts as relevant UK earnings |
The practical consequence is that the post-tax position may be less favourable for some owners, particularly higher or additional-rate taxpayers with significant mortgage borrowing. The effect will vary depending on occupancy, gross income, borrowing level, ownership structure and the owner’s tax position.
The FHL abolition changed tax treatment rather than directly changing the existence of holiday let mortgage products. Lenders still offer holiday let mortgages, still assess projected rental income, and still apply deposit and affordability criteria. The change is to tax treatment, not mortgage availability. A tax adviser should model the post-FHL position for your specific circumstances before you commit to a purchase or decide whether to retain an existing holiday let.
Mandatory Registration for Short-Term Lets in England (2026)
The UK government is introducing a mandatory national registration scheme for short-term lets in England. As at May 2026, GOV.UK states that the scheme is not yet in force and is expected to begin in 2026. Buyers and existing owners should check the latest position before committing to a purchase or letting strategy. The register is expected to be administered at local authority level and is likely to require basic safety documentation including gas safety certificates, electrical installation condition reports, and evidence of appropriate insurance.
Key points for mortgage applicants and existing owners:
- Once in force, properties without valid registration may not be legally let. Lenders may ask for evidence of registration status as part of underwriting once the scheme is operational.
- Scotland introduced mandatory short-term let licensing in October 2022. Local authority licence required — Edinburgh and Highland councils have been active in enforcement.
- Wales is rolling out its own registration scheme and visitor levy during 2026 and 2027. The 182-night availability threshold remains relevant for business rates classification in Wales.
- Northern Ireland has separate arrangements — confirm the position with a specialist adviser before purchasing in Northern Ireland.
Planning rules for short-term lets are evolving. Local planning authorities decide whether planning permission is needed, based on how the property is used and its local impact. Buyers should check the current planning position with the relevant council before exchange of contracts.
Eligibility: What Lenders Require
Deposit
Many holiday let lenders require deposits from around 25%, although requirements vary by lender, property, borrower profile and location. Some require more depending on the property type, location, and borrower profile. Properties in areas where local authorities have introduced licensing restrictions or caps on new short-term lets may face narrower lender appetite at higher LTVs.
| LTV | Deposit on £400,000 property | Deposit on £600,000 property | Typical availability |
| 75% (25% deposit) | £100,000 | £150,000 | Common starting point for some lenders |
| 70% (30% deposit) | £120,000 | £180,000 | May broaden lender choice |
| 65% (35% deposit) | £140,000 | £210,000 | May improve product availability, subject to criteria |
Rental Income Assessment
Lenders assess projected rental income rather than a fixed monthly rent. This typically involves:
- A rental projection from a specialist holiday letting agent or RICS-qualified valuer covering peak, mid, and low season income
- Some lenders may require projected income to cover the stressed mortgage payment by a set margin — for example 125 to 145% — although the calculation varies by lender
- Some lenders use a conservative blended figure based on 30 weeks of projected income rather than 52, to account for void periods
The income assessment is one area where lender criteria vary significantly. A broker with current knowledge of lender criteria can help identify lenders whose assessment may be better aligned with the property and projected income.
Personal Income
Some holiday let lenders require a minimum level of personal earned income. Indicative ranges can vary significantly by lender and borrower profile. This is in addition to any projected holiday let income. Self-employed applicants will need to provide two to three years of tax returns (SA302 and tax year overviews) or certified company accounts. Some lenders have no minimum income requirement but apply a more rigorous overall affordability assessment.
Property Criteria
- Standard residential construction — brick, tile, slate — presents the fewest complications. Non-standard construction narrows the lender pool.
- The property must be in an established or demonstrably viable holiday letting location. Remote or off-market locations with no comparable letting history may face scrutiny.
- Some lenders restrict lending in areas with active local authority caps on new short-term lets. Confirm the position with a broker before proceeding in constrained markets.
- Maximum loan sizes vary. Some building societies cap loans at £1m or below. Larger loans may require specialist or private bank lenders.
- The property must meet all applicable safety and registration requirements — gas safety, electrical, fire risk assessment, and from 2026 national registration in England.
Borrower Criteria
| Criteria | Typical position |
| Minimum age | 21 at application (most lenders) |
| Maximum age | 75-85 at end of mortgage term — some specialist lenders extend further |
| First-time buyers | Permitted by some lenders; others require prior property ownership |
| First-time landlords | Permitted by many lenders with no prior holiday let experience required |
| Limited company applications | Available with some lenders — corporate structure may suit post-FHL tax position for some investors |
| Expats and non-UK residents | Smaller lender pool but available — specialist advice recommended |
How Rental Income Is Assessed: A Worked Example
Here is how a lender might assess rental income on a holiday let application. All figures are illustrative.
| Stage | Detail | Illustrative figure |
| Property | Three-bedroom cottage in the Cotswolds | Purchase price: £500,000 |
| Deposit | 25% minimum deposit | £125,000 deposit / £375,000 loan |
| Rental projection (peak) | Summer weeks — letting agent assessment | £2,200 per week x 16 weeks = £35,200 |
| Rental projection (mid) | Spring and autumn weeks | £1,400 per week x 12 weeks = £16,800 |
| Rental projection (low) | Winter weeks | £800 per week x 8 weeks = £6,400 |
| Projected annual gross income | 36 weeks total letting assumption | £58,400 |
| Lender stress test (125%) | Monthly mortgage payment x 12 x 125% | Loan of £375,000 at 5.5% = £2,244/month. Annual stress test requirement: £33,660 |
| Outcome | £58,400 projected income exceeds £33,660 stress test requirement | The projected income may satisfy this illustrative stress test, subject to full lender assessment, valuation, personal income, credit profile and criteria |
This is a simplified illustration. Actual lender calculations vary. Some lenders use a 30-week assumption rather than 36. Some apply a higher stress rate. The property location, local market evidence, and the letting agent’s track record all factor into how conservatively the income projection is viewed. A broker can run indicative calculations against specific lenders before you apply.
Rates and Costs
As at May 2026, Bank Rate stands at 3.75%. Holiday let mortgage rates are set by individual lenders and reflect the specialist nature of the product — they are generally slightly higher than equivalent standard buy-to-let rates, reflecting the variable income profile and more manual underwriting involved.
A range of building societies and specialist lenders are active in this market. A broker can search current live rates across the lender pool.
| Cost | Typical range | Notes |
| Arrangement / product fee | £0 – £2,500+ | Some lenders charge a percentage fee rather than a flat fee. Compare total cost over the deal period, not rate alone. |
| Valuation / rental income assessment | £400 – £1,500+ | Holiday let valuations often require a specialist rental income projection which costs more than a standard valuation. |
| Legal fees | £1,000 – £2,000 | Solicitor required. Lender may also instruct their own legal representation. |
| Stamp Duty Land Tax | Standard purchase rates plus 5% surcharge | Additional property surcharge of 5% applies on top of standard SDLT rates. Calculator at fitchandfitch.co.uk/stamp-duty. |
| Buildings and contents insurance | Varies | Specialist holiday let insurance required — standard home insurance does not cover commercial letting. |
| Letting agent fees | 10 – 20% of rental income | If using a letting agent to manage the property. Factor into net yield calculations. |
Tax Position After the FHL Abolition
Following the abolition of the FHL regime, holiday lets are taxed as standard property business income. The key points for the 2025-26 tax year onwards:
Mortgage Interest Relief
Higher and additional rate taxpayers can no longer deduct mortgage interest in full from rental income. The restriction introduced for standard buy-to-let in 2017 now applies to holiday lets. Relief is available as a 20% basic rate tax credit against the mortgage interest paid. For a higher-rate (40%) taxpayer, this means the effective tax cost of the mortgage interest has doubled compared to the FHL regime.
Capital Gains Tax
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) and Rollover Relief are no longer available on disposal of a former FHL property. Standard CGT rates apply — 24% for residential property gains for higher-rate taxpayers as at 2025-26. This affects the exit strategy for investors who had planned to sell and reinvest using Rollover Relief.
Limited Company Structures
Some investors are considering whether a limited company structure is more tax-efficient in the post-FHL environment. In a limited company, mortgage interest remains a fully deductible business expense against corporation tax. However, extracting profits involves dividend tax, and acquiring property in a company structure involves higher SDLT in some circumstances and potential complexities on refinancing. The right answer depends on individual tax position, portfolio size, and long-term plans. A qualified tax adviser should model the comparison before any restructuring.
Airbnb Income Reporting
From 2025, platforms including Airbnb are required to report host earnings directly to HMRC. This increases tax transparency. All holiday let income must be declared on self-assessment returns, and records of income and expenditure should be maintained for at least five years.
Holiday Let Mortgage vs Buy-to-Let Mortgage: Key Differences
| Holiday let mortgage | Standard buy-to-let mortgage | |
| Letting arrangement | Short-term — guests, not tenants. Typically through Airbnb, Vrbo, letting agents | Long-term — assured shorthold tenancy. Fixed monthly rent. |
| Income assessment | Projected seasonal income — peak, mid, low season blended | Fixed monthly rent stress-tested against mortgage payment |
| Minimum deposit | Around 25% — many lenders | 20-25% — varies by lender |
| Personal income requirement | Often required — £25-40k minimum with many lenders | Often not required if rental income covers stress test |
| Personal use | Permitted — the owner can use the property | Not permitted — must be let on AST |
| Mortgage interest tax relief | Basic rate credit (20%) — same as buy-to-let since April 2025 | Basic rate credit (20%) |
| Regulation | Typically unregulated (investment property) | Typically unregulated (investment property) |
| Lender pool | Smaller — specialist lenders and building societies | Wider — mainstream, specialist, and building society lenders |
What Should Buyers Consider in 2026?
The post-FHL landscape requires more careful modelling than before April 2025. The factors below are worth working through before committing to a purchase.
Factors that may support a purchase:
- Gross rental income may be higher than standard buy-to-let in some established holiday locations, but costs, occupancy, tax and regulation must be modelled carefully
- Personal use of the property is permitted, which standard buy-to-let does not allow
- Demand and occupancy can vary significantly by location, season, property quality and wider economic conditions
- Past property price growth should not be relied upon when assessing a purchase
Factors that require careful modelling:
- Loss of full mortgage interest deductibility has reduced net returns for higher and additional rate taxpayers with significant mortgage balances
- The 5% additional property SDLT surcharge on purchase increases the entry cost substantially
- Management costs — letting agent fees, cleaning, maintenance, insurance — are higher than for standard buy-to-let
- Income is variable and void periods must be funded from personal income or reserves
- Some tourist locations face increased regulatory risk from local authority licensing schemes and planning restrictions
The viability of any specific property depends on the purchase price, deposit, mortgage rate, projected occupancy, gross yield, tax position, and management cost assumptions. These should all be modelled before committing, ideally with input from both a mortgage broker and a tax adviser.
Why We Wrote This Guide
Fitch & Fitch is an independent mortgage broker. We advise on holiday let mortgages as part of a broader range of residential, investment, and specialist lending work — including buy-to-let, bridging finance, and complex income cases through our Private Office service.
We are an appointed representative of JLM Mortgage Network, authorised and regulated by the Financial Conduct Authority (FCA Registration Numbers 955014 and 300629).
We updated this guide in May 2026 because most publicly available information on holiday let mortgages either has not been updated to reflect the April 2025 FHL abolition, or does not explain the 2026 registration requirements for England. Both changes materially affect the investment case and the mortgage application process.
Frequently Asked Questions
What is a holiday let mortgage?
A holiday let mortgage is a specialist secured loan for a property you intend to rent out on a short-term basis to holidaymakers rather than on a standard tenancy. Lenders assess projected seasonal rental income rather than a fixed monthly rent, and different underwriting criteria apply compared to standard buy-to-let mortgages.
What deposit do I need for a holiday let mortgage?
Many holiday let lenders require deposits from around 25% — equivalent to 75% loan-to-value. Some require more depending on the property, location, and borrower profile. Properties in areas with active local authority licensing restrictions may face narrower product availability at higher LTVs.
Can I still get a holiday let mortgage after the FHL abolition?
Yes. The abolition of the Furnished Holiday Let tax regime on 6 April 2025 changed the tax treatment of holiday let income — it did not change mortgage product availability. Lenders continue to offer holiday let mortgages in 2026. The change is to your tax position, not your ability to finance the property.
How is rental income assessed for a holiday let mortgage?
Lenders typically require a rental income projection from a specialist letting agent or RICS-qualified valuer covering peak, mid, and low season. Some lenders may require projected income to cover the stressed mortgage payment by a set margin — for example 125 to 145% — although the calculation varies. Lender approaches to the stress test vary, which is why the choice of lender can affect the borrowing figure available.
Do I need to register my holiday let in 2026?
If the property is in England, registration will be required once the scheme comes into force. As at May 2026, GOV.UK states the mandatory national registration scheme is not yet in force and is expected to begin in 2026. Scotland has had mandatory licensing since October 2022. Wales is implementing its own scheme in 2026-27. Check the current position for your property’s specific location before completing a purchase.
What are holiday let mortgage rates in 2026?
Holiday let mortgage rates vary by lender, LTV, property type, and product term. They are generally slightly higher than equivalent standard buy-to-let rates. With Bank Rate at 3.75% as at May 2026, the market has changed significantly from the 2022-23 period. A broker can search live rates across the active lender pool for your specific circumstances.
Can I use a holiday let mortgage for an Airbnb property?
Yes, provided the property meets the lender’s criteria and is in an appropriate location. Some lenders have specific restrictions on properties in areas where local authorities have introduced caps or licensing requirements for short-term lets. The planned registration scheme for England is expected to apply to short-term lets, including properties marketed through platforms such as Airbnb, once it comes into force.
Can I personally use the property?
Yes. Unlike a standard buy-to-let, personal use of a holiday let property is permitted. This is one of the distinguishing features of the product. However, extensive personal use relative to the available letting period may affect the rental income projection and the lender’s view of the property’s commercial viability.
Is a limited company structure better for a holiday let in 2026?
Possibly, for some investors. In a limited company, mortgage interest remains fully deductible against corporation tax — unlike the basic rate credit restriction that now applies to individual ownership. However, extracting profits from a company involves dividend tax, there are higher SDLT costs in some scenarios, and refinancing can be more complex. The right answer depends on your individual tax position, income level, and portfolio plans. A tax adviser should model the comparison for your specific circumstances before any decision.
What is the difference between a holiday let and a buy-to-let?
The key difference is the letting arrangement. A buy-to-let is let on an assured shorthold tenancy with a fixed monthly rent. A holiday let is rented to guests on a short-term basis — typically weeks rather than months — with variable seasonal income and personal use permitted. Different mortgage products, different underwriting criteria, and (since April 2025) the same tax treatment apply to both.
Are you ready to take the next steps?
If you’re ready to turn your dream of owning a holiday rental into reality, speak with our expert team. They will assist you in assessing your options and guide you through the lending process. By taking the first steps today, you’ll be much closer to creating a rewarding and successful venture.
Contact Fitch & Fitch at 020 7859 4098 or book a free consultation to discuss your requirements.