The short answer
How is a holiday let taxed now?
The furnished holiday lettings rules ended on 6 April 2025 for Income Tax and Capital Gains Tax, and on 1 April 2025 for companies. The change is law, made by the Finance Act 2025. A holiday let is now part of your property business, and its profit is taxed at 20%, 40% or 45% for 2026/27 alongside any other rental income you have.
What changed when the holiday let rules ended?
- Mortgage interest no longer comes off your profit. You get a tax credit at the basic rate instead, 20% for 2026/27, the same as other landlords.
- New furniture and equipment no longer qualify for capital allowances. Replacing items such as beds, sofas and white goods gets Replacement of Domestic Items Relief instead.
- Holiday let profit no longer counts as earnings for pension tax relief, so it no longer raises how much you can pay in with relief.
- Business Asset Disposal Relief, rollover relief and gift relief no longer apply, apart from limited transitional cases.
- Couples who own a holiday let together are taxed on a 50:50 split, unless they own it in unequal shares and tell HMRC on Form 17 within 60 days of declaring them.
- Holiday let losses carry forward against profits from your wider property business.
What happens to capital allowances you already claimed?
If you had furniture or equipment in a capital allowance pool at 5 April 2025 (31 March 2025 for companies), you keep claiming writing down allowances on that pool in later years until it is used up. New spending from those dates follows the normal rules for residential lets. The calculator leaves these allowances out, so a brought-forward pool would lower the tax shown.
What changes in April 2027?
From 6 April 2027, property income, including holiday let profit, has its own rates in England, Wales and Northern Ireland: 22%, 42% and 47%. Relief for mortgage interest rises to 22% to match. These rates are law, set by the Finance Act 2026. The calculator assumes allowances and bands stay as they are; we recheck after each Budget.
Worked example: one holiday let for 2026/27 (hypothetical)
Priya (hypothetical) earns a £40,000 salary and lets a holiday cottage in England. In 2026/27 it takes £20,000, running costs are £6,000 and mortgage interest is £5,000, so her profit before interest is £14,000.
Her salary uses the £12,570 Personal Allowance and £27,430 of the £37,700 basic rate band. The first £10,270 of profit is taxed at 20% (£2,054) and the remaining £3,730 at 40% (£1,492), which is £3,546.
The mortgage interest gives a credit of 20% of £5,000, which is £1,000. Her holiday let adds £2,546 to her 2026/27 tax bill. On the same figures for 2027/28 the rates become 22% and 42% and the credit 22%, so the bill is £2,259.40 plus £1,566.60, less £1,100: £2,726, which is £180 more.
Do I need Making Tax Digital?
Holiday let takings count towards the qualifying income that decides when Making Tax Digital for Income Tax applies to you: over £50,000 from 6 April 2026, over £30,000 from 6 April 2027 and over £20,000 from 6 April 2028. Qualifying income is your share of gross takings plus any self-employment turnover. Read Do I need Making Tax Digital for Income Tax?.
Common questions
Can I still claim capital allowances on my holiday let?
Only on a pool you already had at 5 April 2025 (31 March 2025 for a company). New furniture and equipment do not qualify, but replacing domestic items can get Replacement of Domestic Items Relief.
I own the holiday let with my spouse. What do I enter?
Your share. Spouses and civil partners are taxed 50:50 unless they own the property in unequal shares and have sent HMRC Form 17. Each of you can run the calculator for your own share.
What about Capital Gains Tax when I sell?
For 2026/27 a gain on a holiday let is taxed at 18% or 24%, like other residential property, and Business Asset Disposal Relief no longer applies. See Capital Gains Tax returns for the 60-day return.
Does the calculator cover Scotland?
No. Scottish taxpayers pay Scottish Income Tax rates, and the April 2027 property rates apply in England, Wales and Northern Ireland only.