\nOur Account Managers keep owners informed about industry changes, tax considerations and legislation updates. Claim your FREE Owner Guide today.<\/strong><\/p>\n
Enquire Now<\/a><\/p>\n Stone Cross Mansion Apartments, Ulverston<\/p><\/div>\n In this guide<\/p>\n Since April 2025, holiday lets have been taxed in the same way as standard residential rental properties. The specialist FHL regime \u2014 which gave qualifying properties business-like tax treatment \u2014 no longer exists.<\/p>\n The main things that changed:<\/p>\n However, the way taxable profits are calculated day-to-day remains largely unchanged. Most running costs are still fully deductible.<\/p>\n Find out more: Abolition of the Furnished Holiday Lettings Tax Regime \u2014 GOV.UK<\/a><\/strong><\/p>\n Read our up-to-date Furnished Holiday Let Tax Guide 2026<\/a><\/strong> on the Sykes Holiday Cottages blog.<\/p>\n Hawkrigg Farm, Far Sawrey Ref. 1041275<\/p><\/div>\n Our partner Zeal<\/a> offer a free helpline for Sykes and sister brand owners \u2014 call 01633 499771 or email Sykes@gozeal.co.uk. You also get an exclusive 10% discount on their standard fees.<\/strong><\/p>\n Tax-deductible expenses are the costs of running your holiday let that you subtract from your rental income before calculating how much tax you owe. The good news is that most day-to-day running costs are still fully deductible, just as they were under the old FHL rules.<\/p>\n Expenses you can usually claim include:<\/p>\n \u2705 Advertising and marketing<\/strong> (listings, social media, brochures) If your holiday let earns \u00a320,000<\/strong> in a year and you have \u00a35,000<\/strong> of allowable expenses, your taxable profit is \u00a315,000<\/strong> \u2014 not \u00a320,000. You only pay tax on the profit.<\/p>\n You can’t claim capital allowances<\/strong> on new furniture or equipment bought from April 2025 onwards. Instead, you can use Replacement of Domestic Items Relief<\/strong> when you replace existing items \u2014 but only on a like-for-like basis.<\/p>\n For a full breakdown, see Zeal Tax’s guide to holiday let allowable expenses<\/a><\/strong> or visit HMRC’s guidance on rental income<\/a>.<\/strong><\/p>\n Most holiday let owners won’t need to worry about VAT. You only need to register if your annual turnover exceeds \u00a390,000<\/strong> \u2014 roughly \u00a37,500 a month. That level of income is only likely if you own a large, high-end property or multiple properties.<\/p>\n If you do cross the threshold, you’ll need to:<\/p>\n Read the latest guidance: VAT on holiday accommodation \u2014 GOV.UK<\/a><\/strong><\/p>\n Bank Barn, Wreay Ref. 1160532<\/p><\/div>\n Buying a holiday home or investment property costs more in stamp duty than buying a main residence. Since October 2024, second homes and holiday lets in England and Northern Ireland attract a 5% SDLT surcharge<\/strong> on top of the standard rates.<\/p>\n The picture is similar elsewhere in the UK:<\/p>\n Read our guide to Stamp Duty for holiday lets<\/a><\/strong> for a full breakdown.<\/p>\n This is one of the most important tax questions for Lake District owners, because the difference between the two can be significant.<\/p>\n In England, your holiday let is assessed for business rates \u2014 rather than council tax \u2014 if it meets both of these conditions:<\/p>\n If your property doesn’t meet both criteria, it’s treated as a second home and subject to council tax.<\/p>\n Many local authorities in Cumbria \u2014 including South Lakeland, Westmorland and Furness, and Cumberland \u2014 now charge a 100% council tax premium<\/strong> on second homes. That means double the standard bill. If your property qualifies for business rates instead, you avoid this entirely.<\/p>\n If your holiday let qualifies for business rates and has a rateable value below \u00a315,000<\/strong>, you may be eligible for Small Business Rate Relief \u2014 which can reduce your bill significantly, and in many cases to zero.<\/p>\n Find out more: Small Business Rate Relief \u2014 GOV.UK<\/a><\/strong><\/p>\n Barn Howe, Lyth Valley Ref 1180254<\/p><\/div>\n If you sell your holiday let at a profit, you’ll likely pay Capital Gains Tax (CGT) on the gain. The current rates for residential property are:<\/p>\n Each individual has an annual CGT exempt amount of \u00a33,000<\/strong>, so gains up to that amount each tax year are tax-free. Check the GOV.UK CGT rates page<\/a><\/strong> for full details.<\/p>\n If you transfer your holiday home to a family member during your lifetime, HMRC treats the transaction as a sale at current market value \u2014 even if no money changes hands. A CGT liability can arise on the full gain, not just the cash received.<\/p>\n When a holiday let owner dies, the property forms part of their estate for Inheritance Tax (IHT) purposes. Most holiday lets do not qualify for Business Relief, so IHT may be payable at 40%<\/strong> on the value above available allowances.<\/p>\n This is a complex area and professional advice is strongly recommended. Read the guidance: HMRC guidance on IHT and FHLs<\/a><\/strong><\/p>\n Oversands Cottage, Grange over Sands Ref 1095487<\/p><\/div>\n Several councils \u2014 including some within the Lake District \u2014 have introduced or are consulting on stricter licensing requirements, occupancy caps, or planning controls on short-term holiday lets. The rules vary by local authority and are changing quickly.<\/p>\n Always check directly with your local council before letting a new property or making significant changes to how you operate.<\/p>\n HMRC is rolling out Making Tax Digital for Income Tax Self Assessment (MTD ITSA)<\/strong> \u2014 a shift to digital record-keeping and quarterly reporting for landlords and self-employed people.<\/p>\n The rules are being introduced in stages based on your annual gross income from property and self-employment:<\/p>\n If you’re already above the \u00a350,000 threshold, you should be keeping digital records and submitting quarterly updates to HMRC now. If you’re not sure whether you’re in scope, speak to your accountant or contact Zeal.<\/p>\n Full guidance: Making Tax Digital for Income Tax \u2014 GOV.UK<\/a><\/strong><\/p>\n Local authorities across Cumbria charge a 100% council tax premium<\/strong> on second homes \u2014 effectively doubling your bill. To avoid this, your property needs to qualify for Business Rates instead.<\/p>\n To qualify, your property must be available for commercial holiday letting for at least 140 days<\/strong> over the next 12 months, and actually let to paying guests for at least 70 days<\/strong> in the previous 12 months. Both conditions must be met.<\/p>\n<\/div>\n<\/details>\n Yes, potentially. If your holiday let qualifies for Business Rates and has a rateable value under \u00a315,000<\/strong>, you may be eligible for Small Business Rate Relief. In many cases this can reduce your bill to \u00a30.<\/p>\n Eligibility depends on the property’s rateable value as assessed by the Valuation Office Agency. It’s worth checking yours if you haven’t already.<\/p>\n<\/div>\n<\/details>\n No \u2014 not if you own the property as an individual. Under the old FHL rules, you could deduct mortgage interest in full. Now, like any buy-to-let landlord, you receive a flat 20% tax credit<\/strong> on your mortgage interest instead.<\/p>\n For higher and additional-rate taxpayers, this change can result in a substantially higher income tax bill. It’s one of the biggest practical impacts of losing FHL status.<\/p>\n<\/div>\n<\/details>\n Limited Companies can still deduct 100% of mortgage interest<\/strong> as a business expense before paying Corporation Tax \u2014 which is why many owners are considering this route.<\/p>\n However, transferring an existing property into a company is treated as a sale by HMRC. That means you could trigger Capital Gains Tax<\/strong> and Stamp Duty surcharges upfront, before seeing any benefit. It’s not a simple decision and the numbers need to be run carefully. Speak to Zeal or a specialist property tax adviser before proceeding.<\/p>\n<\/div>\n<\/details>\n Under the old FHL rules, couples could split profits in any ratio \u2014 so you could allocate more income to the lower earner. That flexibility is gone. HMRC now defaults to a strict 50:50 split<\/strong> for jointly owned properties.<\/p>\n To change the split, you must formally alter the beneficial ownership of the property and file an HMRC Form 17<\/strong> declaration. This requires legal documentation and must reflect the actual ownership structure.<\/p>\n<\/div>\n<\/details>\n MTD for Income Tax requires digital record-keeping and quarterly reporting to HMRC. You’re in scope based on your total gross income from property and self-employment:<\/p>\n If you’re above the \u00a350,000 threshold and haven’t started yet, speak to your accountant or contact Zeal as soon as possible.<\/p>\n<\/div>\n<\/details>\n Lakelovers has 50 years’ experience managing holiday lets across the Lake District and Cumbria. Our team can help you understand what to expect, get your property guest-ready, and make the most of your investment.<\/p>\n For more owner advice, visit our owner advice blog<\/a><\/strong>, including:<\/p>\n![\"\"](\"https:\/\/www.lakelovers.co.uk\/blog\/wp-content\/uploads\/sites\/15\/2024\/05\/Blog-images-640x427-49.png\")
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\nLake District Holiday Let Tax Rules in 2026: What Changed After the FHL Abolition<\/h2>\n
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\nFree tax advice for Lakelovers owners<\/h3>\n
\nTax-Deductible Expenses for Holiday Lets: What Can You Still Claim?<\/h2>\n
\n\u2705 Cleaning and laundry<\/strong>
\n\u2705 Repairs and maintenance<\/strong> (boiler fixes, repainting, replacing broken items)
\n\u2705 Buildings and contents insurance<\/strong>
\n\u2705 Utility bills<\/strong> (gas, electricity, water, broadband)
\n\u2705 Council tax or business rates<\/strong>
\n\u2705 Letting agent and management fees<\/strong>
\n\u2705 Accountancy and professional fees<\/strong>
\n\u2705 Garden maintenance and window cleaning<\/strong>
\n\u2705 Replacement furniture and appliances<\/strong> (subject to HMRC’s Replacement of Domestic Items Relief rules)<\/p>\nA simple example<\/h3>\n
What you can no longer claim<\/h3>\n
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\nVAT Rules for Holiday Lets: Do You Need to Register?<\/h2>\n
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\nStamp Duty on Holiday Lets: The 5% Surcharge Explained<\/h2>\n
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\nBusiness Rates vs Council Tax for Lake District Holiday Lets<\/h2>\n
How to qualify for business rates<\/h3>\n
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Why it matters in the Lake District<\/h3>\n
Small Business Rate Relief<\/h3>\n
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\nTax on Selling a Holiday Home: Capital Gains, Gifting and Inheritance Tax<\/h2>\n
Capital Gains Tax<\/h3>\n
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Gifting to a family member<\/h3>\n
Inheritance Tax<\/h3>\n
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\nLocal Licensing Rules for Lake District Holiday Lets<\/h2>\n
\nMaking Tax Digital (MTD) for Holiday Let Owners: Deadlines and Thresholds<\/h2>\n
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\nHoliday Let Tax FAQs: Your Questions Answered<\/h2>\n
How do I avoid the 100% Council Tax premium on Lake District second homes?<\/summary>\n
Can I get Small Business Rate Relief to reduce my bill to zero?<\/summary>\n
Can I still deduct my full mortgage interest from my rental income?<\/summary>\n
Should I move my holiday let into a Limited Company?<\/summary>\n
Can my spouse and I split our holiday let profits to lower our tax band?<\/summary>\n
What are the Making Tax Digital rules for landlords?<\/summary>\n
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\nLet Your Lake District Holiday Home with Lakelovers<\/h2>\n
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