Holiday lets: what owners and buyers need to know now
High summer is when holiday lets earn their keep. Coastal cottages, lakeside cabins and city flats are booked solid, and every sunny week makes the idea of owning one look more appealing. But the rules that once made a furnished holiday let such an attractive proposition have changed significantly, and more change is on the way. If you own a holiday let, or you are tempted to buy or convert one this year, it is worth understanding where the law now stands. This article covers England and Wales, which increasingly take different paths.
The tax advantages have gone
For decades, a property that qualified as a furnished holiday let was treated, for tax purposes, more like a business than an ordinary rental. That special regime was abolished from April 2025, and former holiday lets are now taxed in the same way as any other residential let.
In practical terms, several reliefs disappeared at once. Full deduction of mortgage interest from rental profit has gone, replaced by a basic-rate (20%) tax credit, which matters most to higher-rate taxpayers who own the property personally. The lower 10% rate of Capital Gains Tax on sale, under Business Asset Disposal Relief, no longer applies, so standard residential CGT rates now bite. Capital allowances on new purchases have been withdrawn in favour of a narrower relief for replacing domestic items, and holiday let income no longer counts towards the earnings used to calculate pension contributions. Couples who jointly own a let also lost the freedom to split profits unequally; the default is now a 50:50 division unless they put a formal declaration in place.
None of this makes holiday letting unviable. It does mean the sums look different from a few years ago, and anyone relying on the old reliefs in their planning should revisit them.
Council tax, the second-home premium, and the business-rates route
One feature does survive, and it has become more valuable as council tax has risen. A genuine holiday let can still be assessed for business rates rather than council tax, and that can make a real difference.
The reason it matters so much now is the second-home premium. In England, councils have been able to charge a premium of up to 100% on second homes since 1 April 2025, effectively doubling the bill, and most billing authorities have adopted it. In Wales, the position is sharper still: councils can charge premiums of up to 300%, and several popular areas are at the higher end. A furnished property that is nobody's main home is squarely in scope.
Business rates offer an escape from that, but only for a property that is genuinely run as a holiday let. In England, it will be assessed for business rates as self-catering accommodation if, over the previous twelve months, it was available to let for at least 140 nights and actually let for at least 70. Where the rateable value is below £15,000 and you let only the one property, small business rate relief may reduce the bill to nothing. Wales applies stricter tests: available for at least 252 days and actually let for at least 182.
The "actually let" figure is the catch. Advertising a property is not enough; the lettings have to happen, and the Valuation Office will want evidence. Moving onto business rates also reclassifies the property as commercial, which can affect insurance cover and mortgage terms, so it is not a decision to take on the tax saving alone.
When letting becomes a change of use
Planning is the strand owners most often overlook. Letting a property out occasionally is one thing; running it as year-round, commercial-scale holiday accommodation can amount to a "material change of use" that requires planning permission, particularly for self-contained annexes and outbuildings.
In England, councils increasingly use Article 4 directions to remove the automatic right to change use in areas under housing pressure, which means permission is needed where it once was not. Wales has gone further, introducing distinct planning use classes that allow councils to require permission for second homes and short-term lets. And in London, a long-standing rule limits short-term letting of a residential property to 90 nights a year without planning permission. If you are buying with holiday letting in mind, the lawful planning use of the property is one of the first things to check.
What is confirmed, and what is still only proposed
This is where it pays to be precise, because a good deal of what circulates online describes plans that are not yet law.
In Wales, the change is real and dated. The Visitor Accommodation (Register and Levy) Etc. (Wales) Act 2025 is in force, and registration of all visitor accommodation opens on 1 October 2026. Anyone charging for overnight stays of 31 nights or less will have to register with the Welsh Revenue Authority; registration is free and mandatory. Separately, the Act lets each council choose to introduce a visitor levy on overnight stays, at 75p or £1.30 per person per night depending on the type of accommodation, with under-18s exempt in shared accommodation such as campsites and hostels. No levy can take effect before April 2027, and only after local consultation, so whether one applies will depend entirely on the council.
In England, by contrast, the much-discussed national registration scheme for short-term lets and the new C5 planning use class remain proposals. The powers exist under the Levelling-up and Regeneration Act 2023, and the government has signalled an intention to introduce both, but the implementing legislation has not been made and the launch date has slipped more than once. Until it does, there is no national register to join and no C5 class to fall into; the existing planning rules and the local levers described above are what apply.
Where to go from here
Holiday letting can still be a sound venture, but the landscape in 2026 rewards owners who understand it and catches out those working from the old assumptions. The tax reliefs have gone, council tax on a second home can be punishing, business rates are available only to genuine lettings that meet the thresholds, and the rules now differ meaningfully between England and Wales. Before you buy, convert, sell, or simply plan the year's lettings, it is worth getting the position confirmed for your particular property and area. If any of this affects you, speak to your solicitor, who can check the planning position, the rating and council tax treatment, and what the coming changes will mean for you.