Holiday Let vs Long-Term Let: Which Pays Better After Tax in 2026/27?
Furnished holiday lettings lost their special tax status from April 2025 — so how does a holiday let actually compare to a standard long-term rental for tax in 2026/27?
Quick answer
Since the Furnished Holiday Lettings regime was scrapped from April 2025, the tax gap between running a holiday let and a standard long-term rental has narrowed considerably — both are now subject to the same mortgage-interest restriction and lose the special capital allowances and reliefs that used to make holiday letting more tax-efficient.
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Rental yield calculatorWhat changed: the end of the FHL regime
Until 5 April 2025, a property that qualified as a Furnished Holiday Letting (meeting availability and letting-days tests) benefited from a distinctly more generous tax regime than ordinary residential lets: full mortgage interest deductibility (rather than the Section 24 restriction), capital allowances on furniture and equipment, and access to Business Asset Disposal Relief and rollover relief on sale. From 6 April 2025, all of this was abolished, and furnished holiday lettings are now taxed under exactly the same property income rules as any other residential rental.
Rental Yield Calculator
Calculate gross and net rental yield for buy-to-let properties.
Rental yield calculatorMortgage interest: now the same restriction for both
Both a holiday let and a long-term let owned personally are now subject to the Section 24 restriction, which limits relief for mortgage interest to a basic-rate (20%) tax credit rather than allowing the full interest cost to be deducted from rental income before tax — a change that particularly affects higher-rate taxpayers, since it can push someone into paying tax on income they haven't genuinely received as profit after interest costs.
Yield vs effort: the practical trade-off that remains
Even with the tax playing field levelled, the operational trade-off between the two models hasn't disappeared. Holiday lets can often achieve a higher gross rental yield per week when occupied, but come with materially higher running costs (cleaning between every stay, utility bills usually included, more frequent maintenance from higher turnover of guests) and meaningful void periods outside peak season. Long-term lets typically offer lower but far more predictable income, minimal management overhead, and much lower void risk once a tenancy is established.
What still differs, and transitional details worth checking
A small number of technical differences remain even post-abolition — for instance, some transitional rules affect how existing FHL losses carried forward are treated, and there can be nuances around whether furnished holiday letting profits still count as relevant UK earnings for pension contribution purposes in particular circumstances. Given how recently this changed (April 2025), anyone currently running or considering a holiday let should get up-to-date advice from an accountant rather than relying on older guidance describing the old FHL regime as still current.
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Frequently asked questions
Do holiday lets still get better tax treatment than long-term lets?
No, not since 6 April 2025 — the Furnished Holiday Lettings regime was abolished, and holiday lets are now taxed under exactly the same property income rules as ordinary long-term residential lets, removing the previous tax advantages.
Can holiday let owners still deduct full mortgage interest from rental income?
No, since the FHL regime ended, holiday lets are subject to the same Section 24 restriction as long-term lets, limiting mortgage interest relief to a 20% tax credit rather than a full deduction against rental income.
Do holiday lets still qualify for capital allowances on furniture?
No, capital allowances on furniture and equipment were a specific FHL benefit that ended with the regime's abolition from April 2025 — holiday lets now follow the same replacement-of-domestic-items relief rules as other residential lets.
Is a long-term let now more tax-efficient than a holiday let?
The tax treatment is now essentially the same for both when held personally, so the choice comes down to the operational trade-offs — potentially higher gross yield and effort for a holiday let, versus more predictable, lower-maintenance income for a long-term let.
Are there any transitional rules left over from the old FHL regime?
Yes, some transitional provisions affect how pre-existing FHL losses carried forward are treated and how furnished holiday letting profits interact with pension contribution rules in certain cases — worth checking current guidance with an accountant given how recently the regime changed.
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