Running a Holiday Let Business in the Lake District
The Lake District has long been one of the UK’s most desirable locations for owning a holiday home. With...
by Gaynor Anderson / Owner Hub
Whether you’re considering letting your property for the first time or you’re an established owner, understanding the current tax rules is essential for maximising your returns and staying compliant with HMRC requirements. In this blog, we’ll explain the tax reliefs that holiday let owners can still benefit from following the end of the Furnished Holiday Let (FHL) scheme.
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Stone Cross Mansion Apartments, Ulverston
In April 2025, the Furnished Holiday Let (FHL) tax regime was abolished for individuals, companies, and trusts operating qualifying holiday lets. This means that the specific tax advantages previously available to FHL owners no longer apply, and holiday lets are now taxed in the same way as long-term residential or commercial rental properties. Find out more about the Abolition of the furnished holiday lettings tax regime.
However, despite these changes, the way taxable profits are calculated remains largely unchanged. Many day-to-day business expenses, including cleaning, maintenance, and guest welcome packs, can still be claimed as allowable tax deductions.
Read our up-to-date Furnished Holiday Let Tax Guide 2026 on the Sykes Holiday Cottages blog.
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.
Simply put, tax-deductible expenses are the costs of running your holiday let that you can subtract from your rental income before calculating how much tax you owe.
Examples of expenses holiday let owners can usually claim include:
✅ Advertising and marketing (website listings, social media ads, brochures)
✅ Cleaning and laundry costs
✅ Repairs and maintenance (fixing a boiler, repainting, replacing broken items)
✅ Insurance for the property
✅ Utility bills (gas, electricity, water, broadband)
✅ Council tax or business rates
✅ Letting agent and management fees
✅ Accountancy and professional fees
✅ Garden maintenance and window cleaning
✅ Replacement of furniture, appliances, and household items (subject to HMRC rules)
If your holiday let earns £20,000 in a year and you have £5,000 of allowable expenses:
You would normally pay tax on the £15,000 profit, not the full £20,000 income.
As tax legislation can be complex and circumstances vary from one property owner to another, it’s always worth seeking professional advice to understand how the current rules apply to your individual situation and to ensure you’re making the most of any available reliefs.
You can’t claim capital allowances for new purchases from April 2025 onwards, but Replacement of Domestic Items Relief allows you to claim tax relief on replacing furnishings and appliances.
To find out more, visit the HMRC website or view Zeal Tax’s guide to holiday let allowable expenses.
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:
Read the latest guidance on VAT on Holiday accommodation
Bank Barn, Wreay Ref. 1160532
If you’re considering buying a holiday home or investment property, you will usually pay higher property purchase taxes than someone buying their main residence. In England and Northern Ireland, this means a 5% SDLT surcharge.
Likewise, Scotland charges an 8% Additional Dwelling Supplement, while Wales applies a separate set of higher Land Transaction Tax rates for additional properties.
Read our guide to Stamp Duty for holiday lets which provides further information.
If your Lake District holiday let qualifies for business rates instead of council tax, you could pay significantly less, particularly if you’re eligible for Small Business Rate Relief.
In England, a holiday let is assessed for business rates rather than council tax if it:
If your property doesn’t meet these criteria, you’ll pay council tax instead.
This is especially important for Lake District holiday homeowners, as many local authorities have introduced council tax premiums on second homes. In areas such as South Lakes, Westmorland and Furness and Cumberland, second homes can be charged a 100% council tax premium, meaning owners may pay double the standard council tax bill if their property is not assessed for business rates.
If your holiday let does qualify for business rates and has a rateable value below £15,000, you may also be eligible for Small Business Rate Relief, which could significantly reduce your bill — and in some cases reduce it to zero.
Find out more about business rates for holiday lets
Barn Howe, Lyth Valley Ref 1180254
If you sell your holiday let and make a profit, you may be liable to pay Capital Gains Tax (CGT) on the gain. For residential property disposals, CGT is currently charged at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, depending on your overall taxable income and the size of the gain. Check the GOV.UK website for full information.
If you decide to pass your holiday home on to a family member during your lifetime, HMRC will usually treat the transfer as though the property has been sold at its current market value. This means a CGT liability could arise even if no money changes hands.
Before the abolition of the Furnished Holiday Let (FHL) regime in April 2025, holiday let owners could benefit from certain Capital Gains Tax reliefs, including Hold-Over Relief and Roll-Over Relief in specific circumstances. Following the removal of the FHL tax regime, these reliefs are generally no longer available to holiday let owners purely by virtue of operating a furnished holiday let.
When a holiday let owner dies, the property’s value will normally form part of their estate for Inheritance Tax (IHT) purposes. While relief may be available in limited circumstances, most holiday lets do not qualify for Business Relief, meaning IHT could be payable on the property’s value above any available allowances and exemptions. The standard rate of Inheritance Tax remains 40%.
Read guidance here HMRC guidance on IHT and FHLs
Oversands Cottage, Grange over Sands Ref 1095487
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 for more details.
HMRC is phasing in a new way to report income, Making Tax Digital for Income Tax Self Assessment depending on your annual gross turnover. From April 2026, you’re only required to register if your relevant income meets the following thresholds:
Relevant income refers to earnings from rental properties and/or sole trader businesses, based on your taxable income from the previous financial year. This includes keeping digital records and filing quarterly summaries with HMRC.
Up to date info here Making Tax Digital explained
Local authorities across Cumbria (including South Lakes, Westmorland & Furness, and Cumberland) charge a 100% council tax premium on second homes, effectively doubling your bill. To avoid this, your property must qualify for Business Rates instead of Council Tax.
To transition to Business Rates, your property must meet strict HMRC limits: it must be available for commercial holiday letting for at least 140 days over the next 12 months, and actually let to paying guests for at least 70 days during the previous 12 months.
Yes. If your holiday let successfully qualifies for Business Rates rather than Council Tax, and its rateable value is under £15,000, you may be eligible for Small Business Rate Relief.
Depending on the property’s size and location within the Lake District, this relief can significantly slash your local tax liability—in many cases reducing your ongoing bill entirely to £0.
No, not if you own the property as an individual. Following the abolition of the Furnished Holiday Let (FHL) status, holiday lets are treated like standard buy-to-let properties. This means you can no longer deduct your mortgage interest from your gross rental income before calculating tax.
Instead, individual owners receive a flat 20% basic-rate tax credit. For higher or additional-rate taxpayers, this change can result in a substantially higher income tax bill.
Many owners are considering this move because Limited Companies are still allowed to deduct 100% of mortgage interest costs as a business expense before paying Corporation Tax.
However, transferring an existing property into a company is treated as a sale. This means you could trigger immediate Capital Gains Tax (CGT) and corporate property purchase taxes (such as Stamp Duty surcharges). Always consult an expert like Zeal Tax to weigh the setup fees against long-term income tax savings.
Under the old FHL rules, couples could flexibly split profits in whatever ratio was most tax-efficient (e.g., allocating 99% of profits to the spouse in the lower tax bracket). Now that the FHL scheme has ended, HMRC defaults to a strict 50:50 profit split for jointly owned properties.
To change this setup, you must legally alter the underlying beneficial ownership shares of the property and file an official HMRC Form 17 declaration.
HMRC is rolling out digital record-keeping and mandatory quarterly reporting. Your registration deadline depends entirely on your total gross income from all property rentals and sole-trader businesses:
Lakelovers has 50 years’ experience in managing holiday lets across the the Lake District and Cumbria. This means our team know a thing or two about helping you get the most from your holiday property.
If you’d like to read more about letting your holiday home, check out our owner advice blog.
Here, we’ve put together numerous holiday letting guide blogs on a wide range of subjects, including:
Windermere Team
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 or alternatively, complete the form below to request contact from our team, including a copy of our FREE Owner Guide.
Tax rules may change and the information is correct at the time of publication. The information above has been provided by Zeal and is intended for general guidance only. Lakelovers does not provide tax, legal or financial advice, and nothing in this article should be interpreted as such. Tax rules and individual circumstances vary, so you should always consult the relevant legislation, HMRC guidance, and seek advice from a qualified professional before making any decisions relating to your holiday let.
While Lakelovers may introduce third-party providers such as Zeal, we make no representations or warranties regarding the accuracy, suitability, reliability or quality of any products or services they provide. Any agreement for goods or services is entered into solely between you and the third-party provider and at your own risk. Lakelovers accepts no liability for any loss, damage or decisions made in reliance on the information contained within this article or arising from any arrangement with a third-party provider.
Interested in letting a property outside of the Lake District? We’re proud to be part of Sykes Holiday Cottages, with a network of regional brands offering the same award-winning service across the UK. Enquire now to be put in touch with your local holiday letting experts.
Find out how we can work together. With over 25 years’ experience, our local expertise will give you peace of mind and bring you the bookings you deserve.
by Gaynor Anderson / Owner Hub
Hi, I'm Gaynor and I joined the Lakes team in Jan 2020. I live and work in the beautiful Lake District! My passion is anything out...
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