Holiday let rules in 2026 for business rates, tax and letting requirements

Running a holiday let in 2026 is very different from just three years ago. The furnished holiday lettings tax regime that made short-term letting attractive has been abolished. Councils can now double the council tax on second homes, and a national registration scheme for short lets in England is on the way. Plenty of owners still make the numbers work, but the rules have tightened at every step.

Tax depends on your personal circumstances, and this article provides general information rather than advice. Here is where the rules stand in 2026 and which changes are still pending.

The tax breaks that disappeared in April 2025

The furnished holiday lettings (FHL) regime was abolished on 6 April 2025. Since the 2025/26 tax year, income from holiday accommodation is taxed under ordinary residential landlord rules. The practical effects appear in four areas. Mortgage interest is no longer fully deductible. Like other individual landlords, you now get only a basic rate credit of 20% on finance costs, the Section 24 treatment we explain in our separate article for landlords. Capital allowances on new furniture and equipment have gone. The capital gains perks, including business asset disposal relief on a sale, no longer apply to new disposals, so most owners face residential capital gains tax at 18% or 24%. Holiday let profits no longer count as relevant earnings for pension contributions.

Business rates or council tax, and the 140 and 70 night test

A holiday let in England is only assessed for business rates rather than council tax if it clears the self-catering thresholds on gov.uk: available for commercial letting for at least 140 nights in the last 12 months, actually let for at least 70 nights in that period, and intended to be available for 140 nights in the year ahead. Stays longer than 28 nights do not count. Because the test looks backwards at your actual record, a newly launched holiday let normally starts on council tax and only moves onto the rating list after a season of real bookings.

Wales is far stricter, requiring 252 nights available and 182 nights actually let. From 1 April 2026, a new option lets you average the 182 nights over up to three years if you fall just short in a single year.

Clearing the test matters because of small business rate relief. If the property's rateable value is £12,000 or less and it is your only business property, relief is 100% and you pay nothing at all, with tapered relief up to £15,000.

A worked example of rates relief against the premium

Suppose your cottage has a rateable value of £10,000. Passing the 140- and 70-night test and claiming small business rate relief, your bill is £0. Even without relief, £10,000 multiplied by the 2026/27 small business multiplier of 43.2p would be £4,320. Fail the letting test, and you are back on council tax as a second home, where councils in England can charge a premium of up to 100%. On a Band D bill of £2,400, that means £4,800 a year. The gap between £0 and £4,800 is the same property with different letting performance, which is why the 70 nights matter so much. There is some breathing space in the premium rules. Councils must allow exceptions of up to 12 months for properties in probate and for homes being actively marketed for sale, so a holiday let you are genuinely selling should not be hit straight away.

The stamp duty surcharge on buying a holiday let

A holiday let is an additional property, so the 5% stamp duty surcharge applies on top of standard bands. The return is due within 14 days of completion. We cover the sums in our separate article on stamp duty on a second home, and the same arithmetic applies here.

The rules that are coming but not yet in force

Two changes are confirmed for England but were still not law as of August 2026, and it is worth being precise about that:

• A mandatory national registration scheme for short-term lets is being introduced, expected to begin in 2026, but gov.uk's own guidance still lists registration as not yet in force. There is nothing to register for today.
• A new planning use class for short lets, with associated permitted development rights, has been announced, but no regulations have yet been made, so ordinary planning rules still apply. Greater London is the exception that already exists: whole-home short lets there are capped at 90 nights a year without planning permission.

Watch both, because once the register is live, it is expected to become a compliance condition for letting at all.

The bottom line

In 2026, a holiday let pays its way when it genuinely lets: 70 nights or more gets you business rates and very often a £0 bill with small business rate relief, while a quiet year can mean a doubled council tax charge of £4,800 on a typical Band D cottage. The FHL tax regime is gone; the 5% surcharge applies when you buy, and registration is coming. If you are buying or selling a holiday property, get legal advice that understands the sector: compare conveyancing quotes to find a firm that does.