Holiday Let Mortgages (2026): How They Work, Rates & Criteria
A holiday let is a different beast to a standard buy-to-let — you can’t use a normal BTL mortgage, lenders judge you on projected seasonal income, and the tax rules changed dramatically in 2025. Here’s exactly how holiday let mortgages work now, and what you’ll need.
Quick Answer
A holiday let mortgage is a specialist product for a property you’ll let to holidaymakers on short stays — and it’s distinct from a standard buy-to-let. You can’t fund a holiday let with an ordinary BTL mortgage; most BTL lenders prohibit short-term letting, and breaching that can let them call in the loan. Instead, specialist lenders assess you on the property’s projected seasonal income (low, mid and high season), usually backed by a letter from a recognised holiday-letting agent, plus a minimum personal income (often around £25,000) as a safety net.
Expect a deposit of 25–40% (so a maximum loan-to-value of around 75%, with select lenders reaching 80% on strong cases), and rates typically 0.5–2% higher than an equivalent buy-to-let. You can usually stay in the property yourself, capped at around 60–90 nights a year. One big thing to know: the Furnished Holiday Lettings (FHL) tax regime was abolished on 6 April 2025, so holiday lets are now taxed like any other rental — the old tax advantages have gone. Take tax advice, and use a broker, as the lender panel is narrow. Your home may be repossessed if you do not keep up repayments on your mortgage.
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What Is a Holiday Let Mortgage?
A holiday let mortgage funds a property you intend to rent out to holidaymakers on short-term stays — a cottage in Cornwall, a Lake District cabin, a coastal flat — usually with some personal use by you and your family. It’s a distinct product category, offered by a relatively small panel of specialist lenders (building societies such as Cumberland, Leeds and Furness, and specialists like Paragon, Shawbrook and Foundation Home Loans feature regularly).
The defining feature is how the property earns: instead of a single tenant on a long lease paying steady monthly rent, a holiday let earns variable, seasonal income from many short bookings — high in summer, low in winter. That different risk profile is why holiday lets need their own mortgage, their own income assessment, and their own lender panel, and why they sit apart from a standard buy-to-let.
Why You Can’t Use a Normal Buy-to-Let Mortgage
This is the single most important thing to understand, and it catches people out: a standard buy-to-let mortgage does not permit holiday or short-term letting. Most BTL lenders explicitly prohibit it in their terms, because short-term letting carries different (higher) risks — voids between bookings, wear and tear, seasonal income, and management intensity.
Letting on the wrong mortgage is a serious risk
If you buy on a normal BTL mortgage (or worse, a residential mortgage) and then let the property out as a holiday let or on Airbnb, you’re likely breaching your mortgage terms — and lenders can respond by demanding immediate repayment of the whole loan. Some residential lenders permit limited short-letting of up to around 90 days a year (useful if you occasionally Airbnb your own home), but running a property as a business holiday let requires a proper holiday let mortgage. It’s not a technicality to gloss over — get the right product from the start.
This also sets holiday lets apart from your other rental options: they’re not a standard buy-to-let, not an HMO, and not a home you’re letting temporarily on a consent-to-let basis. They’re their own category, with their own rules.
How Lenders Assess Holiday Let Income
Because a holiday let’s income is seasonal and variable, lenders don’t use the simple monthly-rent calculation applied to a standard buy-to-let. Instead, they build a picture from projected seasonal income (as of 2026 — confirm current):
- A seasonal projection — expected income across low, mid and high season weeks, rather than one flat monthly figure. This is usually evidenced by a letter from a recognised holiday-letting agent estimating achievable income for the property and location.
- Actual income history — if the property already trades as a holiday let, 1–2 years of actual booking income strengthens the case significantly and can improve the terms.
- An interest coverage ratio (ICR) — the projected income must typically cover the mortgage interest by around 145% (often stress-tested at a notional rate), the same principle as buy-to-let but applied to holiday income.
- A minimum personal income — most lenders also require you to earn a minimum personal income (commonly around £25,000), so they know you could support the mortgage if bookings dip. Affordability here isn’t purely rent-driven.
A holiday let mortgage calculator is coming
Because the sums combine a seasonal projection, an ICR stress test and your personal income, working out what you can borrow isn’t a single simple formula — it varies by lender. We’re planning an interactive holiday let mortgage calculator to model it; in the meantime, a specialist broker can run your figures across the lender panel and tell you the realistic borrowing range. As a rough guide, loan ceilings often sit around £500,000 to £1 million for typical cases, but depend entirely on the projected income and your circumstances.
Deposit, Rates and Criteria
The standard parameters for holiday let mortgages in 2026 (indicative — confirm current):
| Factor | Typical position |
|---|---|
| Deposit | 25–40% (a few lenders accept 20% on strong cases) |
| Max LTV | Usually 75%; select lenders reach 80%; best pricing sub-65% |
| Rates | Roughly 0.5–2% higher than equivalent buy-to-let (the gap has narrowed) |
| Personal income | Minimum often ~£25,000 |
| Personal use | Allowed, capped around 60–90 nights a year by the lender |
| Property type | Lenders prefer standard-construction houses/flats in holiday areas; unusual construction is harder |
A nice feature of holiday lets is the personal use allowance — unlike a buy-to-let, you can generally stay in your own holiday home yourself, typically up to 60–90 nights a year (the exact cap varies by lender). Lenders want the property available and marketed commercially for the rest of the season, though, so you can’t block it out for family use and still expect the income projection to hold.
Limited Company Holiday Lets
Just like standard buy-to-let, many holiday let investors now buy through a limited company (SPV), and holiday let mortgages for limited companies are widely available in 2026 — the rate gap between personal-name and company applications has narrowed considerably over the past couple of years. Company ownership can be more tax-efficient for higher-rate taxpayers (mortgage interest is a company expense rather than being restricted to a basic-rate credit), which has become more relevant since the 2025 tax changes below.
Whether personal or company ownership is right depends heavily on your tax position, other income and plans, so it’s a decision to take with a qualified accountant — the same consideration applies as with a limited company structure generally, and it interacts with the stamp duty surcharge too. A broker who arranges both personal and company holiday let mortgages can help you compare the lending side once you’ve chosen a structure.
The 2025 Tax Change Every Holiday Let Owner Must Know
This is the biggest shift in holiday let ownership in a generation, and a lot of older guides haven’t caught up. The Furnished Holiday Lettings (FHL) tax regime was abolished on 6 April 2025 (under the Finance (No. 2) Act 2024). Holiday lets are no longer a special tax category — their income is now taxed the same as any standard residential rental property. What that removed:
| Before (until 5 Apr 2025) | Now (from 6 Apr 2025) |
|---|---|
| Full mortgage interest deducted from income | 20% basic-rate tax credit only (like other landlords) |
| Capital allowances on furniture/fittings | No new capital allowances (Replacement of Domestic Items Relief only) |
| 10% Business Asset Disposal Relief on sale (CGT) | Standard residential CGT rates (18% / 24%) |
| Income counted for pension contributions | No longer counts as relevant earnings |
What it means in practice
For a higher-rate taxpayer with, say, £10,000 of annual mortgage interest, the effective tax increase is roughly £2,000 a year — the loss of full interest relief is the single biggest hit. This has genuinely reshaped the economics of holiday lets, especially for personal-name owners, and is a major reason serious investors have shifted toward limited company ownership. On top of this, Making Tax Digital for income tax begins phasing in from April 2026 (for property income over £50,000), requiring digital records and quarterly updates. None of this is mortgage advice or tax advice — it’s exactly why you should speak to a qualified accountant before buying. We’re an introducer and don’t give tax advice.
Planning, Licensing and the Nations
Beyond tax, the regulatory landscape for holiday lets is tightening, and it varies across the UK (as of 2026 — confirm current):
- England — registration & planning: a mandatory national registration scheme for short-term lets is being introduced from around 2026, and a new C5 planning use class separates short-term lets from ordinary homes. Some areas (Cornwall, Bath, Brighton) already use Article 4 directions removing permitted-development rights for change to short-let use — and lenders increasingly want evidence of planning compliance where these apply.
- Scotland: a short-term let licensing scheme is in force — you generally need a licence from the local authority, and letting without one can be an offence. Scotland also uses LBTT (not stamp duty) with its own additional-dwelling rules.
- Wales: has its own rules, including a demanding availability/letting threshold (the 252/182-day test) for self-catering properties to be rated as businesses, plus LTT in place of stamp duty.
These rules affect not just legality but your mortgage: lenders want confidence the property can be let commercially, so planning or licensing problems can stall an application. It’s another reason a broker who knows the holiday let market — and the local picture — is worth having.
The bottom line
A holiday let mortgage is a specialist product, and you genuinely can’t substitute a standard buy-to-let — most BTL lenders ban short-term letting, and breaching that risks the loan being called in. Lenders assess you on projected seasonal income (via an agent’s letter or your trading history), require a 25–40% deposit (max ~75% LTV, some 80%), charge ~0.5–2% above BTL rates, and want a minimum personal income — but they’ll let you use the property yourself for 60–90 nights a year. The FHL tax regime ended in April 2025, so the old tax perks are gone and many owners now favour limited company ownership — take accountant advice. With a narrow, criteria-driven lender panel, matching to the right lender is where a specialist broker earns their keep.
Compare mortgage deals and we’ll connect you with an FCA-regulated broker who arranges holiday let mortgages — personal or limited company — free, with no obligation and no fee to you.
Frequently Asked Questions
How do holiday let mortgages work?
A holiday let mortgage funds a property you’ll rent to holidaymakers on short stays. Unlike a buy-to-let, lenders assess it on projected seasonal income — expected earnings across low, mid and high season, usually evidenced by a letter from a recognised holiday-letting agent, or your actual trading income if the property already lets. The projection must cover the mortgage interest by around 145%, and lenders also require a minimum personal income (often about £25,000) as backup. You’ll typically need a 25–40% deposit, and can use the property yourself for around 60–90 nights a year.
Can I use a buy-to-let mortgage for a holiday let?
No. Most buy-to-let mortgages specifically prohibit short-term and holiday letting, because the risks are different, and letting a property out as a holiday let on a standard BTL (or residential) mortgage usually breaches your terms — which can allow the lender to demand immediate repayment. Some residential lenders permit limited short-letting of up to around 90 days a year, useful for occasional Airbnb of your own home, but running a property as a business holiday let requires a proper specialist holiday let mortgage. Always get the right product from the outset.
How much deposit do I need for a holiday let mortgage?
Typically 25–40% of the property value, meaning a maximum loan-to-value of around 75%, though a few lenders accept a 20% deposit (80% LTV) on strong cases. The best rates are usually reserved for lower loan-to-values, often sub-65%. As well as the deposit, lenders assess the projected seasonal rental income and usually require a minimum personal income of around £25,000. Deposit requirements, rates and criteria vary across the fairly narrow panel of specialist holiday let lenders, so it’s worth comparing options through a broker.
Are holiday let mortgage rates higher than buy-to-let?
Generally yes, but the gap has narrowed. Holiday let rates in 2026 are typically around 0.5% to 2% higher than equivalent buy-to-let rates, reflecting the perceived extra risk of seasonal income and the smaller lender pool. As with any mortgage, a lower loan-to-value secures a better rate, with the sharpest pricing usually below 65% LTV. Limited company holiday let rates, once notably higher, are now much closer to personal-name rates. Because pricing and criteria vary widely between the specialist lenders, comparing across the panel with a broker helps you find the best fit.
Can I stay in my own holiday let?
Yes, that’s one of the advantages over a standard buy-to-let. Most holiday let lenders allow you to use the property yourself, typically capped at around 60 to 90 nights per year, with the exact limit set by the lender. The key condition is that the property must be genuinely available and marketed commercially for the rest of the letting season, so you can’t block out large periods for personal use and still rely on the rental income projection. You and your family can stay free within your personal-use allowance.
How were holiday lets affected by the 2025 tax changes?
The Furnished Holiday Lettings tax regime was abolished on 6 April 2025, so holiday lets are now taxed the same as standard residential rentals. The main losses are: full mortgage interest deduction is replaced by a 20% basic-rate tax credit; capital allowances on furniture are gone (only Replacement of Domestic Items Relief remains); Business Asset Disposal Relief (10% CGT) is replaced by standard rates of 18%/24%; and the income no longer counts for pension contributions. This has increased the tax burden, especially for higher-rate personal-name owners, prompting many to consider limited company ownership. Speak to a qualified accountant.
- HMRC / GOV.UK — abolition of the Furnished Holiday Lettings regime (Finance (No. 2) Act 2024, effective 6 April 2025); Making Tax Digital for Income Tax
- MoneyHelper — holiday let and buy-to-let mortgages
- Specialist holiday let lender criteria (LTV, deposit, ICR, projected income, personal use) — indicative and subject to change
- Short-term let registration (England), licensing (Scotland) and self-catering rules (Wales) — evolving; confirm current
Important information
nextmove is an introducer, not a lender, mortgage adviser or tax adviser. This article is for general information only and does not constitute financial or tax advice. Holiday let lender criteria (deposit, LTV, rates, income assessment, personal-use limits), the post-April-2025 tax treatment, planning, registration and licensing rules are indicative, vary between lenders and UK nations, change over time, and should be confirmed as current with GOV.UK, HMRC, the relevant authority or a qualified adviser before you rely on them. Tax and ownership-structure decisions should be discussed with a qualified accountant. Some buy-to-let and holiday let mortgages are not regulated by the Financial Conduct Authority. We introduce you to FCA-regulated mortgage brokers who can arrange holiday let mortgages, and we may receive a fee or commission for doing so.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home.
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