The UK holiday let market faces significant regulatory change in 2026. Two changes are certain: a mandatory national registration scheme for short-term lets in England, expected to begin later in 2026, and the full impact of the Furnished Holiday Let (FHL) tax regime abolition, which took effect on 6 April 2025. A third, a proposed C5 planning use class that would separate holiday lets from residential properties, remains exactly that, a proposal. No legislation has been laid and no start date exists. If you own or are considering buying a holiday let, these changes affect your tax position, planning obligations, and mortgage options.
Fox Davidson arranges specialist holiday let mortgages across England, Scotland, and Wales. We have been placing holiday let cases since 2013, and the regulatory shifts over the past two years have changed how lenders assess these properties. This guide covers what has changed, what is coming, and what is still only proposed.
What is the mandatory registration scheme for short-term lets?
The government is introducing a mandatory national registration scheme for all short-term lets in England. The legal power to create it sits in the Levelling-up and Regeneration Act 2023, and the government confirmed in February 2024 that the scheme would go ahead. Ministers targeted April 2026 for launch, but as of July 2026 the register is not live. No portal, fee structure or technical guidance has been published, and official guidance now says only that the scheme is expected to begin in 2026. A voluntary registration phase is likely to precede mandatory enforcement. Once live, hosts will submit property details, safety compliance documentation and evidence of insurance cover, and each registered property will receive a unique registration number that must be displayed on all listing platforms including Airbnb, Booking.com, and Vrbo.
According to the Department for Levelling Up, Housing and Communities, an estimated 257,000 short-term let listings were active in England as of 2023. The registration scheme is designed to give local authorities visibility over this market for the first time.
Once registration becomes mandatory, failure to register will result in enforcement action. Local authorities will have powers to issue fines, request listing removals from platforms, and impose operational restrictions on unregistered properties. The scheme was originally targeted for 2024 and has slipped before, so treat any specific start date you read elsewhere with caution until GOV.UK publishes one.
What is the proposed C5 planning use class?
The government has proposed a new planning use class, C5, specifically for short-term lets in England. It has not been introduced. The proposal came out of a consultation that ran in 2023, the consultation outcome has never been formally published, and no statutory instrument has been laid before Parliament. Government statements have pointed to 2026 at the earliest, but as of July 2026 there is no legislation and no commencement date. Until that changes, holiday lets in England remain governed by the Town and Country Planning (Use Classes) Order 1987, treated either as C3 residential use or, where letting is intensive enough to amount to a material change of use, as sui generis.
If introduced as consulted on, C5 would draw a clear line: properties used primarily for short-term letting would be a distinct use from residential housing. Converting a residential property to full-time holiday letting would require planning permission in most cases, and local authorities would gain the power to designate Short-Term Let Control Zones where all new holiday let use requires planning approval, regardless of scale. One point causes repeated confusion: C5 already exists in Wales. The Welsh Government introduced use classes C5 (second homes) and C6 (short-term lets) in October 2022, and both are in force there now. If you read that C5 is live, the source is almost certainly describing Wales, not England.
In Greater London, the existing 90-night annual limit for entire-home short-term lets without planning permission remains in force. This is settled law under the Deregulation Act 2015 and does not depend on C5. Outside London, there is no automatic national cap, but local authorities can impose restrictions through Article 4 Directions. Areas with high tourist pressure, such as Cornwall, the Lake District, and coastal towns, would be the likeliest early adopters of Control Zones if C5 is introduced.
Where planning permission is needed, a full application for a material change of use costs £610 from 1 April 2026. Fees are set nationally in England, and processing takes several weeks to several months. If you are buying a property specifically for holiday letting, factor this into your timeline.
How does the FHL tax abolition affect holiday let owners?
The Furnished Holiday Let regime was abolished on 6 April 2025. This is the single most significant change for existing holiday let owners, and its financial impact is substantial.
Under the old FHL rules, qualifying holiday lets were treated as a trade for tax purposes. This meant full mortgage interest deduction against rental income, capital allowances on furniture and fixtures, capital gains tax relief including business asset disposal relief (10% rate), and the ability to make pension contributions based on rental profits. None of these advantages now apply.
Holiday let income is now taxed as standard property business income. For higher-rate taxpayers, the key change is mortgage interest: you can no longer deduct mortgage interest from rental income. Instead, you receive a 20% tax credit on the interest paid, which for a 40% or 45% taxpayer represents a significant increase in effective tax liability.
Capital gains tax is also affected. Holiday let owners previously qualified for business asset disposal relief, which applied a 10% CGT rate on disposal up to a £1m lifetime limit. That relief no longer applies. Holiday let disposals are now subject to standard CGT rates: 18% for basic-rate taxpayers and 24% for higher-rate taxpayers on residential property gains.
According to HMRC, the FHL abolition applies to all accounting periods beginning on or after 6 April 2025 for income tax and 1 April 2025 for corporation tax. If you hold a holiday let through a limited company, the same loss of trading status applies.
What safety standards must holiday lets meet?
All registered short-term lets must meet mandatory safety standards. These are not new requirements in practice (most responsible hosts already comply), but the registration scheme formalises them and makes non-compliance enforceable.
You need a valid gas safety certificate issued by a Gas Safe registered engineer, renewed annually. You need a fire risk assessment and smoke alarms on every floor. You need an electrical installation condition report (EICR) confirming the property meets current standards. You need carbon monoxide detectors in any room with a solid fuel appliance or gas boiler. All furniture must comply with the Furniture and Furnishings (Fire Safety) Regulations 1988, and you must have adequate public liability insurance.
Lenders also check safety compliance. Most holiday let mortgage providers require evidence of gas and electrical certificates, and some require confirmation of public liability cover as a condition of the mortgage.
How do holiday let mortgages differ from residential mortgages?
You cannot run a full-time holiday let on a standard residential mortgage. Most residential lenders restrict short-term letting entirely, or cap it at a limited number of nights per year (typically 90 days or fewer). If you are letting commercially through Airbnb, Booking.com, or a local letting agent, you need a specialist holiday let mortgage.
| Criteria | Residential mortgage | Holiday let mortgage |
|---|---|---|
| Short-term letting permitted | No, or limited (up to 90 days) | Yes, full-time commercial letting |
| Minimum deposit | 5% to 10% | 25% |
| Affordability basis | Personal income | Projected rental income (ICR 125% to 175%) |
| Personal income requirement | Varies | £25,000 to £60,000 depending on lender |
| Owner use restriction | Must be your main residence | Typically limited to 90 days per year |
| Safety compliance | Not checked | Gas, electrical, and insurance required |
Holiday let mortgage rates are typically 0.5% to 1.0% higher than equivalent buy-to-let rates. Most lenders assess affordability using projected rental income from a holiday letting valuation, with an interest coverage ratio (ICR) of 125% to 175% depending on the lender and tax rate. We arrange holiday let mortgages across England, Scotland, and Wales, including for Airbnb properties and annexes.
Do annexes and outbuildings need separate registration?
Yes. If you are letting a self-contained annexe, granny flat, or converted outbuilding as a short-term let, it will require its own registration entry under the new scheme. Safety standards apply to the annexe independently of your main residence.
Planning is the bigger issue. Year-round or near year-round letting of a self-contained annexe constitutes a material change of use. You will likely need planning permission for the annexe portion, even if the main house remains residential (C3). The main residence does not require a change-of-use application in this scenario.
From a mortgage perspective, if the annexe is part of a property secured against your residential mortgage, you should disclose the letting to your lender. Most residential lenders will not permit it. If the annexe is substantial and generates meaningful income, a separate holiday let mortgage on the property or a restructured facility may be required.
How do regulations differ across the UK?
England’s registration scheme is expected to begin during 2026, and the C5 use class remains a proposal. Scotland, Wales, and Northern Ireland have their own frameworks, and in planning terms both Scotland and Wales are further ahead than England.
Scotland introduced mandatory short-term let licensing on 1 October 2022, with existing hosts required to apply by 1 October 2023. Operating without a licence is a criminal offence. All hosts must hold a licence from their local authority, with conditions covering safety, insurance, and maximum occupancy. Edinburgh and the Highlands have been particularly active in enforcement. We arrange holiday let mortgages in Scotland, where lender appetite varies depending on the property’s licensing status and location.
Wales is rolling out its own registration scheme and visitor levy powers during 2026 and 2027. The 182-night rule remains a key threshold: properties must be available for letting for at least 252 nights per year and actually let for at least 182 nights to qualify for business rates rather than council tax. This rule predates the FHL abolition and remains relevant for business rates classification, even though the tax advantages of FHL status no longer apply.
Northern Ireland requires certification and registration for tourist accommodation through Tourism NI, with its own safety and quality standards.
What are the risks of operating without compliance?
Operating a short-term let without registration, planning permission, or lender disclosure carries compounding risks. Once the registration scheme is live, local authorities will have direct enforcement powers including fines, listing removal requests to platforms, and operational restrictions. HMRC now receives earnings data directly from Airbnb and other platforms, so undeclared income is increasingly difficult to conceal.
The mortgage risk is often underestimated. If your lender discovers you are running a commercial holiday let on a residential mortgage, they can increase your interest rate, demand immediate repayment of the full loan, or begin repossession proceedings. In practice, most lenders will require you to refinance onto an appropriate product. We see this regularly and can help restructure the finance, but it is always better to have the right mortgage in place from the start.
What should holiday let owners do now?
If you already own a holiday let, review your position against three questions. First, is your mortgage appropriate for the letting you are doing? If you are on a residential mortgage and letting commercially, speak to us before a lender audit surfaces it. Second, do you have all the safety documentation in place (gas, electrical, fire risk assessment, insurance)? You will need these for registration. Third, have you spoken to your accountant about the FHL abolition? The tax position for many holiday let owners changed significantly in April 2025, and some may benefit from restructuring into a limited company or reconsidering whether holiday letting remains financially viable.
If you are buying a holiday let, factor in the 25% deposit requirement, the higher stamp duty rate for additional properties (you can calculate this using our stamp duty calculator), and the lead time for planning permission if required in your area.
Frequently asked questions
What is the mandatory national registration scheme for short-term lets?
The government is introducing a mandatory national register for all short-term lets in England, created under the Levelling-up and Regeneration Act 2023. Ministers targeted April 2026, but as of July 2026 the register has not launched and no go-live date, portal or fee structure has been published. Official guidance says the scheme is expected to begin in 2026, likely starting with a voluntary phase before registration becomes mandatory. Once it is, every property will need a unique registration number displayed on all listing platforms, supported by safety documentation and insurance evidence.
Do I need planning permission to let my property short-term?
Planning permission is generally required for year-round or commercial-scale short-term letting, particularly for self-contained annexes and outbuildings. The proposed C5 use class would clarify the distinction between residential and short-term let use, but it is not yet law in England, so the position depends on your local planning authority’s view of whether a material change of use has occurred. Under the proposals, local authorities would be able to designate Control Zones where all new holiday let use requires planning approval. In Greater London, the 90-night limit for entire-home lets without planning permission remains in force.
How has the FHL tax abolition affected holiday let owners?
Since 6 April 2025, holiday let income is taxed as standard property business income rather than trading income. The key losses are full mortgage interest deduction (replaced by a 20% tax credit), capital allowances on furniture and fixtures, and business asset disposal relief for capital gains tax (previously 10%, now 18% or 24%). For a higher-rate taxpayer with £10,000 in annual mortgage interest, the effective tax increase is around £2,000 per year.
Can I run a holiday let on a residential mortgage?
No. Most residential mortgage lenders restrict or prohibit commercial short-term letting. Limited letting of up to 90 days per year may be permitted by some lenders, but full-time Airbnb or holiday letting requires a specialist holiday let mortgage with a minimum 25% deposit and affordability assessed on projected rental income.
What safety standards are required for holiday lets?
Registered short-term lets must have a valid annual gas safety certificate, an electrical installation condition report, a fire risk assessment with smoke alarms on every floor, carbon monoxide detectors where required, furniture compliant with fire safety regulations, and public liability insurance. These documents will be required as part of the registration process.
Does Scotland have different holiday let rules?
Yes. Scotland introduced mandatory short-term let licensing in October 2022, ahead of England’s registration scheme. All hosts must hold a licence from their local authority, with conditions covering safety, insurance, and maximum occupancy. Edinburgh and Highland councils have been particularly active in enforcement.
What happens if my lender discovers I am letting without permission?
The lender can increase your interest rate, demand immediate repayment of the full loan, or begin repossession proceedings. In practice, most lenders require you to refinance onto an appropriate holiday let or buy-to-let product. It is always better to have the correct mortgage in place from the outset rather than risk a forced refinance under pressure.
Is it still worth owning a holiday let after the FHL abolition?
For many owners, yes, but the margins are tighter. The loss of full mortgage interest deduction and capital gains relief means holiday lets need higher occupancy rates and stronger yields to remain financially attractive. Properties in high-demand locations with consistent bookings and low mortgage balances are least affected. Properties with high mortgage balances and inconsistent occupancy are most at risk of becoming uneconomic. Your accountant should model the post-FHL position before you commit to a purchase or decide to retain.
Related guides
- Holiday Let Mortgages Guide 2026
- Airbnb Mortgage Eligibility and Income Tax
- 182-Night Rule: Holiday Let Mortgages in Wales
- Buy to Let Mortgages UK Guide
- Limited Company Buy to Let Guide
Recent client cases