Comparison Guide · Updated July 2026
Holiday Let Mortgage vs Buy-to-Let Mortgage 2026: Rules and Tax
A holiday let mortgage is a specialist product for short-term seasonal letting, while a standard buy-to-let mortgage is designed for a long-term assured shorthold tenancy. Since the Furnished Holiday Lettings tax regime was abolished from April 2025, the tax gap between the two has narrowed, but lending criteria, rates and insurance requirements remain distinct in 2026.
TL;DR
- Holiday let mortgage: For short-term seasonal letting; higher rates; income assessed on seasonal projections
- Buy-to-let mortgage: For a standard 6–12 month tenancy; wider lender choice; assessed on annual rent
Side-by-Side Comparison
| Feature | Holiday Let Mortgage | Buy-to-Let Mortgage |
|---|---|---|
| Tenancy type | Short-term, multiple guests per year | Standard 6–12 month AST |
| Lender pool | Smaller, specialist lenders | Wide mainstream and specialist market |
| Rate level | Typically higher | Typically lower |
| Affordability basis | Projected seasonal rental (high/medium/low season) | Annual rent, usually stress-tested at 125–145% |
| Personal use allowed | Often permitted within limits, must be declared | Not permitted — must be let, not owner-occupied |
| Insurance | Specialist holiday let cover required | Standard landlord insurance |
| Post-April 2025 tax treatment | Broadly aligned with standard letting (FHL regime abolished) | Section 24 finance-cost restriction applies to individuals |
What Is a Holiday Let Mortgage?
A holiday let mortgage is a specialist lending product for properties let out on a short-term basis to a series of different holidaymakers, rather than one long-term tenant. Because occupancy is seasonal and income can fluctuate significantly between peak and off-peak periods, lenders assess affordability differently — usually requiring an independent letting agent estimate showing projected weekly income across high, medium and low seasons, then applying a stress test to that blended figure.
What Is a Standard Buy-to-Let Mortgage?
A standard buy-to-let mortgage funds a property let on an assured shorthold tenancy (AST) to one household for a fixed term, typically 6 or 12 months. Affordability is usually assessed using the Interest Coverage Ratio (ICR) test — lenders commonly require rental income to cover 125%–145% of the mortgage payment at a stressed interest rate, depending on the landlord's tax status and whether the property is held personally or through a limited company.
Tax Treatment After the FHL Regime Abolition
Until 5 April 2025, Furnished Holiday Lets that met HMRC's occupancy tests benefited from full mortgage interest deductibility, access to capital allowances on furnishings, and eligibility for certain Capital Gains Tax reliefs — advantages that standard buy-to-let landlords lost under the Section 24 finance-cost restriction phased in from 2017–2020. From 6 April 2025, the FHL regime was abolished, and holiday lets are now broadly taxed in the same way as other residential lettings, meaning individual landlords face the same restriction on mortgage interest relief (given as a basic-rate tax credit rather than a full deduction). This significantly narrows — though does not entirely eliminate — the historic tax advantage of holiday letting. Always confirm the current position on gov.uk, as transitional provisions can apply.
Which Should You Choose?
The choice now depends primarily on yield potential and personal circumstances rather than tax advantage. A property in a strong tourist location with high seasonal demand may still generate a materially higher gross yield as a holiday let, offsetting the higher running costs (cleaning, management commission, marketing, furnishing) and higher mortgage rate. A property in a typical residential area with steady long-term tenant demand is usually better suited to standard buy-to-let, where the lender pool is larger, rates are lower and management is simpler.