Holiday lets can produce strong income in the right location, but they sit awkwardly between conventional buy-to-let and a trading business, and lenders treat them accordingly. Not every buy-to-let lender will consider short-term letting, and those that do assess the property and the income differently. With the furnished holiday lettings tax regime abolished from 6 April 2025, landlords also need to look afresh at how their income is taxed. This guide covers how holiday let mortgages work in 2026, what lenders look for and the points to check before you buy.
Holiday let mortgages versus standard buy-to-let
A standard buy-to-let mortgage assumes a tenant on an assured shorthold tenancy for six or twelve months. A holiday let is let for short stays, so a standard buy-to-let mortgage will usually prohibit it, and letting the property in breach of the mortgage terms can be a serious problem. Holiday let mortgages are designed for this use, and are typically offered on a buy-to-let basis rather than as residential mortgages.
How lenders assess the income
Because income varies by season, lenders usually look at one of two things: a projected rental income, often supported by a letter or report from a letting agent or holiday-letting platform, or an interest coverage ratio applied to that projected income. Our guide to buy-to-let interest coverage ratios explained shows how the calculation works and why it can limit the loan size. Many lenders discount the projected income to allow for void periods, and some will also take into account the borrower’s other income.
Deposit requirements are commonly higher than for standard buy-to-let, with 25% or more being typical, although criteria differ between lenders and over time.
Property and location factors
- Location. Lenders look at tourist demand, seasonality and whether the area supports lettings across the year rather than only a few months.
- Property type and condition. Standard construction in sound condition is easier to finance than non-standard builds, and lenders may require specific insurance and safety certification.
- Planning and local rules. Some areas restrict short-term lets or require permission, and local authorities have been consulting on or introducing registration and planning controls. Check the position for your property before exchange.
- Lease terms. For flats, the lease may prohibit short-term letting altogether.
Tax changes landlords should be aware of
The furnished holiday lettings regime, which gave qualifying landlords benefits such as full finance cost relief and capital allowances, was abolished from 6 April 2025, and holiday let income is now generally taxed under the same rules as other property income. The impact on any individual depends on how the property is owned and the level of borrowing. Landlords should take advice from a qualified tax adviser or accountant on their own position. Ownership through a company is one option some landlords consider, and our article on buy-to-let mortgages: personal name versus limited company compares the lending side of that decision.
Rate environment
With the Bank of England Bank Rate held at 3.75% at the September 2026 meeting, buy-to-let pricing, including holiday let products, has remained broadly steady. Pricing depends on loan-to-value, fees and the lender’s appetite for short-term lets, so comparing the whole market is more useful than looking at a single headline rate.
Practical checklist before you buy
- Confirm the mortgage and, for flats, the lease permit holiday letting.
- Obtain realistic income projections from an independent letting agent.
- Check planning, licensing and registration requirements locally.
- Budget for cleaning, management, utilities and periods of low occupancy.
- Take tax advice on ownership structure before you commit.
Next steps
Our buy-to-let mortgages service page covers the range of landlord lending we arrange, and the Buy-to-Let and Portfolio Landlord Hub brings together our landlord guides. To discuss a holiday let purchase or refinance, speak to Giles Finance, or see the areas we cover.
Buy-to-let lending, including holiday let mortgages, is generally not regulated by the FCA. Your property may be repossessed if you do not keep up repayments on your mortgage. Nothing in this article is tax advice; tax treatment depends on individual circumstances and may change.
Giles Finance is a trading style of Giles Finance & Consultancy Services, authorised and regulated by the Financial Conduct Authority (FRN 726857).