Holiday Let Tax Guide 2026: Tax Reliefs, Expenses and Rules for Holiday Home Owners

Stone Cross Mansion Apartments, Ulverston

Holiday Let Tax Rules in 2026

Hawkrigg Farm, Far Sawrey Ref. 1041275

Got a tax question? Zeal have a free helpline for Sykes and sister brand owners, get in touch via Sykes@gozeal.co.uk and as a Sykes and brand owner you have the benefit of exclusive 10% discount on standard fees.

Find out more in Sykes Holiday Cottages up to date FHL Tax Guide 2026

Image credit Chay_Tee

Find out more about the rules and legal requirements for letting a holiday property.

VAT Rules for Holiday Lets

If the turnover on your FHL exceeds the VAT threshold which is currently £90,000, you will need to become VAT registered. Currently the standard VAT rate applicable is 20%. The threshold is set at around £7,500 per month which most holiday lets are unlikely to achieve unless it’s a large house or high end, luxury property or multiple properties.

If the turnover is above £90,000, you will need to:

• Charge VAT on your rental income
• Reclaim VAT on eligible expenses

For more GOV.UK information about VAT on Holiday accommodation

Bank Barn, Wreay Ref. 1160532

What are classed as Holiday Let Tax deductible expenses?

Allowable expenses are applicable for tax relief for qualifying Plant & Machinery (P&M) assets used in a business, e.g include furniture, furnishings, equipment, and also hot tubs for holiday lets.

Although holiday let owners won’t be able to claim capital allowances on new purchases made after April 2025, they can still benefit from the ‘Replacement of Domestic Items Relief’ for certain replacements. Domestic items eligible for this relief may include:

• Household appliances (fridges, freezers, washing machines)
• Moveable furniture (sofas, tables, bed frames)
• Furnishings (curtains, rugs, carpets)
• Kitchenware (utensils, crockery, cutlery)

However, new holiday let properties after April 2025, will no longer be able to claim capital allowances on the initial purchase of these assets, so to claim tax relief will only apply to replacements.

For more detailed information about Furnished Holiday Let Tax Guide, please click here to view our sister brand blog page with Sykes Holiday Cottages

Stamp Duty Land Tax (or equivalent)

In the UK, purchasing a second property, which is not your primary residence, could result in a Stamp Duty Land Tax surcharge. As of 31st October 2024, the surcharge will be 5% in England (up from 3%), while in Wales, it remains at 5% (referred to as Land Transaction Tax). In Scotland, the rate is higher, set at 8% (known as Land and Buildings Transaction Tax).

Read our guide to Stamp Duty for holiday lets which provides further information.

Business Rates vs Council Tax

FHLs available for let at least 140 days per year may be assessed for business rates instead of council tax. Many small FHL businesses may be eligible for Small Business Rate Relief, reducing your rates bill to £0 in some cases.

More info here  Guidance on business rates for holiday lets

Inheritance Tax (IHT) Considerations

Most FHLs do not qualify for Business Property Relief (BPR) for IHT purposes, unless you provide substantial services such as daily housekeeping or catering — something more akin to running a hotel.

Read guidance here HMRC guidance on IHT and FHLs

Local Licensing Rules

With growing concern over housing shortages, some councils — including those in the Lake District have introduced or proposed stricter licensing, caps, or planning regulations on holiday lets. Always check with your local authority.

Making Tax Digital (MTD) for All Landlords

From April 2026, if your property income exceeds £50,000, you’ll be required to comply with Making Tax Digital for Income Tax Self Assessment. This includes keeping digital records and filing quarterly summaries with HMRC.

Up to date info here  Making Tax Digital explained

Need some more advice?

We know it can very difficult getting your head around tax for holiday lets, especially if you’re new to letting. That’s why we’ve partnered with tax experts Zeal; to make sure that you’re not missing out on potential tax savings on your holiday let property. Contact Zeal Tax on their free helpline 01633 499771 or by emailing sykes@gozeal.co.uk. 

Looking to buy or change agencies, contact our local team here in the Lakes, phone us on 015394 88855, or alternatively, complete the form below to request contact from our team, including a copy of our FREE Owner Guide.

Disclaimer

The advice above is given by Zeal. Lakelovers can’t advise you on, and isn’t responsible for, tax matters in relation to your holiday let and the above should not be taken as such, rather as a prompt of the issues involved for further consideration. As always, please read the relevant laws, regulations and guidance and seek advice from external experts where you require it. Lakelovers hopes that by pointing you in the direction of an expert in the field, it’s starting you off on the right foot, and you can read into this matter further and seek your own advice from Zeal, or your chosen advisor, as and when you feel it’s needed. We cannot make any representations or warranties of any kind as to the competency, qualification, fitness for purpose, accuracy, reliability, suitability, or availability of Zeal’s offers, products or services. If you choose to enter into any arrangement for the supply of goods or services of a supplier listed in this newsletter or links, you do so entirely at your own risk. Any such arrangement is between you and the supplier. We are not a party to it. We shall not be liable for any loss or damage arising under or in connection with any such arrangement or any action or decisions you take or do not take as a result of reading the above or any loss suffered as a result.