This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
Categories: holiday lets | guides | holiday let guides
Furnished holiday lets (FHLs) are short-term rental properties typically targeted at the holiday sector. They are subject to different rules than standard buy to let properties and also require a specific holiday let mortgage.
In Scotland you are required to have a licence to operate a holiday let.
In the following guide, we’ll take a deeper dive into this subject and address questions such as:
What are the criteria for furnished holiday lets?
To qualify as an FHL, a property must:
- Be located in the United Kingdom or the European Economic Area (EEA), which includes Norway, Iceland, and Liechtenstein.
- Contain enough furniture for normal occupation.*
- Be available for public rental for at least 210 days a year (self-occupation is excluded from this figure).
- Be rented commercially for a minimum of 105 days a year.
- Not have any individual rental period greater than 31 days**
- Not have over 155 days of combined long-term stays***
Please note, Commercial Trust can only help with holiday let mortgages on properties in the UK.
*There are no specific requirements regarding what this constitutes.
**If a rental period is longer than 31 days, it will not count toward the total for that year unless it has occurred in unexpected circumstances such as the occupants flights being delayed/cancelled or if the holidaymaker fell ill and could not leave.
***Includes all stays of 31 days or more.
What are the occupancy requirements for a furnished holiday let?
The occupancy requirements for FHLs are pretty clear, but there are some specifics that need to be addressed, so let’s take a closer look.
Must be available to be commercially let for 210 days
To ensure that the property is a genuine FHL, it must be available for at least 210 days every year to paying members of the public. If you stay at the property at any time, you are not allowed to count those days. The same is true for periods when the property is rented to friends and family at a discounted rate or for free.
However, if you let your furnished holiday property to family or friends at the full market rental rate, those days can count towards the 105-day letting condition required for a property to qualify as a Furnished Holiday Let (FHL) for tax purposes.
HMRC specifies that the property must be let commercially with the intention of making a profit. This means that as long as the property is let at market rates, even to family or friends, it is considered a commercial let and counts towards the occupancy threshold. However, days when the property is let at zero or reduced rates (i.e., below market value) do not count towards the 105-day requirement.
This is outlined in HMRC's Property Income Manual, which states:
"Don’t count any days when the customer lets the property to friends or relatives at zero or reduced rates as this isn’t a commercial let."
Therefore, if you need to ensure that lettings to family or friends count towards the FHL occupancy requirements, it's essential to charge the full market rental rate.
Length of lettings
Rental periods of 31 days or more do not count towards the qualifying occupation of the property for holiday letting purposes (except in exceptional circumstances where a tourist has been unable to leave the property – see below). This is to prevent long-term lets masquerading as holiday lets.
Must be rented out to the public for a certain number of days
Finally, FHLs need to be occupied for 105 or more days per year. As noted above, this requirement excludes all letting periods of more than 31 days, unless that period was extended due to unexpected and uncontrolled circumstances, such as illness, lockdowns/quarantines, or a delayed flight.
This rule is in place to prevent second homeowners from abusing the system when they have no intention of renting out their homes.
However, it doesn’t mean that you won’t meet the criteria if you fail to attract holidaymakers to your property. There are two exceptions, known as “elections”.
An Averaging Election
If you own multiple properties that qualify as FHLs and one or more don’t meet the 105-day requirement, you can elect to apply this condition to the average rate for all of your properties.
For instance, if you have three properties with 110 occupied days each and one with 100, it equates to a total of 430 days and an average of 107.5, which is sufficient.
An averaging election can only be applied to a single FHL business and you’re not permitted to mix properties in the UK and EEA.
Period of Grace Election
If you had full intent to meet the letting conditions but were unable, you could still qualify via a period of grace. You must show that you tried to let the property, such as by proof of marketing or cancelled lettings.
A period of grace is allowed if the letting condition was achieved in the previous year. A second period of grace is allowed in the following year, but if the property fails to meet the requirements in year 4, it will lose its FHL status.
Can you get a furnished holiday let mortgage?
Furnished holiday let mortgages are used to acquire properties that will be let to short-term tenants, including tourists. To qualify, you must meet the requirements outlined above, as well as those put forward by the lender.
Most lenders require a deposit of at least 25%, equating to a loan-to-value (LTV) of 75%, but deposits can be from an absolute minimum of 20%. The total amount you can borrow will depend on the rental income, which in turn can vary based on everything from the property size to the location.
You can use our calculator to check today’s holiday let mortgage rates.
Stamp duty is also payable, and it is charged at the residential rate and not the commercial rate. Like buy to let mortgages, holiday lets are subject to a 5% surcharge if they are worth more than £40,000. So, even if your holiday let is worth less than £250,000, which would be enough to exclude you from stamp duty on a first home, you will still be charged this tax surcharge.
You can use our buy to let stamp duty calculator here.
How Commercial Trust can help you
Whether you’re a first time holiday let landlord or an experienced property owner seeking some advice, Commercial Trust can help. Our experts are well-versed in buy to let mortgages, bridging loans, commercial mortgages, and, of course, holiday let mortgages.
Get in touch today to learn more.
FAQs
Also known as holiday cottage mortgages, furnished holiday let mortgages are for properties used for short-term rentals, such as holiday accommodation.
The tax treatment of furnished holiday lets is set to changed in April 2025 to align with changes in taxation for long term lets. Where they were previously automatically treated as a business, this will is now not be the case in the future. The details are summarised in our Guide to holiday let taxes. Investing via a limited company may become more tax efficient for some people as a result of the changes. Seek professional tax advice to understand your own circumstances.
Holiday lets are taxed in the same way standard rental properties are, as of April 2025. Revenue expenses can be claimed for (e.g. ongoing running costs like utilities, insurance, repairs, etc.) and replacement of domestic items relief is still in place, which covers like-for-like replacements of things like fridges, freezers, dishwashers, washing machines.
Yes, you are allowed to stay in your own FHL and can also rent it to friends and family at reduced rates, providing it still meets the FHL requirements with fully paid for lets amounting to at least 105 days. The number of days you can self-occupy a holiday let property have rules applied to them which you can find above on this page.
