Long-Term Let vs Holiday Let: Which Pays Less Tax in 2026/27?
Since the Furnished Holiday Lettings regime was abolished, long-term lets and holiday lets are taxed almost identically. What actually still differs between the two in 2026/27.
Quick answer
For years, holiday lets enjoyed genuinely better tax treatment than long-term lets. That gap has now largely closed: since the Furnished Holiday Lettings regime was abolished from April 2025, both are taxed under the same general property income rules, including the same Section 24 mortgage interest restriction. The decision between the two should now be driven mainly by yield, workload and local rates treatment, not by a tax advantage that no longer exists.
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Rental yield calculatorWhat the old FHL regime used to give holiday lets
Before abolition, a property meeting the Furnished Holiday Lettings criteria (available and actually let for enough days a year, not occupied long-term) got a genuinely better deal: full mortgage interest deductibility rather than the Section 24 basic-rate restriction, capital allowances on furnishings and fittings, income counting as relevant earnings for pension contribution purposes, and potential access to Business Asset Disposal Relief on sale โ none of which apply to a standard long-term letting.
What changed from April 2025
The FHL regime was abolished, meaning furnished holiday lets are now taxed under the same general property income rules as any other residential letting โ the same Section 24 mortgage interest restriction (a basic-rate tax credit rather than full deduction) applies to both types of letting equally, removing the single biggest historic tax advantage of holiday letting.
uk-furnished-holiday-let-abolition-guide-2026What genuinely still differs
- Council Tax vs business rates: a property let commercially as self-catering accommodation, meeting the letting-day thresholds, can still be assessed for non-domestic rates rather than Council Tax โ potentially attractive given small business rates relief, while a long-term let is charged ordinary Council Tax (typically paid by the tenant).
- VAT: furnished holiday letting is a standard-rated supply for VAT purposes and can count towards the ยฃ90,000 VAT registration threshold at sufficient scale โ most long-term residential letting income doesn't count towards VAT registration in the same way.
- Workload and yield profile: entirely separate from tax, holiday lets typically generate higher gross income per week in strong locations but with far higher management overhead, cleaning costs, and void-period risk than a long-term tenancy.
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Buy-to-let calculatorBottom line
Choose between long-term and holiday letting based on realistic yield, effort and local demand โ not on a tax advantage for holiday lets that mostly disappeared with the FHL regime's abolition. The one area still worth checking specifically is whether your holiday let can genuinely qualify for business rates instead of Council Tax.
Sources
- GOV.UK: Abolition of the Furnished Holiday Lettings tax regime
- GOV.UK: Tax relief for residential landlords (Section 24)
- GOV.WALES / VOA: Self-catering and business rates
Frequently asked questions
Is a holiday let still taxed more favourably than a long-term let?
No โ since the Furnished Holiday Lettings (FHL) tax regime was abolished from April 2025, both long-term lets and short-term holiday lets are taxed under the same general property income rules, including the Section 24 mortgage interest restriction, removing most of the previous tax advantage of holiday letting.
What did the FHL regime used to give holiday lets that long-term lets didn't?
Before abolition, FHL status gave full mortgage interest deduction (not restricted by Section 24), access to certain capital allowances on furnishings, and the ability to count as relevant earnings for pension contribution purposes, and potential Business Asset Disposal Relief on sale โ advantages long-term lets never had.
Does Council Tax still work differently for holiday lets?
Yes โ this is one area that genuinely still differs. A property let commercially as self-catering accommodation for enough days a year can qualify for non-domestic (business) rates instead of Council Tax, while a long-term let is charged Council Tax (usually paid by the tenant, not the landlord, once let).
Which type of let generates higher gross rental income?
This varies hugely by location and season โ holiday lets in popular tourist areas can generate significantly higher gross income per week than an equivalent long-term tenancy, but with higher management costs, void periods, and more work, which needs weighing against the now-similar tax treatment.
Is VAT relevant to either type of letting?
Furnished holiday letting income (unlike most residential letting) can, in principle, count towards the VAT registration threshold if run at sufficient scale, since holiday accommodation is treated as a standard-rated supply for VAT โ worth checking if you run multiple holiday let properties.
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