If you run UK short-let accommodation, your tax bill for 2025/26 is almost certainly higher than last year's, even if you took the same bookings for the same money. That's because 2025/26 is the first full tax year since the Furnished Holiday Lettings (FHL) regime ended, mortgage interest relief was replaced with a 20% tax credit, and digital platforms started reporting hosts' income directly to HMRC.
Meanwhile, demand for short-let accommodation continues to surge. According to figures the Office for National Statistics (ONS) published on 24 June 2026, short-let stays reached 100,911,620 guest nights in 2025, up 11.5% on the previous year.
This article explains the three tax changes that have reshaped how UK short-lets are taxed, shows what they could cost you, and sets out what to do if your rental income hasn't been fully declared.
But First, What is a “Guest Night”?
A guest night is one night's stay multiplied by the number of people in the booking. One guest staying three nights is three guest nights, a family of four staying two nights is eight guest nights, and so on.
It is not the same as a "stay" (one booking) or a "night" (one night the property is occupied, regardless of party size). The ONS uses guest nights because they capture the true volume of short-let demand and reflect both how long people stay and how many travel together.
Key Takeaways
- UK short-let accommodation passed 100 million guest nights in 2025
- This is a rise of 11.5% from 2024, according to ONS figures published pm 24 June 2026
- The Furnished Holiday Lettings (FHL) regime was abolished from 6 April 2025; since then, short-let income has been taxed as ordinary property income
- Mortgage interest is not fully deductible for most individual short-let landlords
- Under the Income Tax (Trading and Other Income) Act 2005, it is relieved through a 20% basic rate tax credit for 2025/26, with the Finance Act 2026 increasing this to 22% from 2027/28
- Since 1 January 2024, digital platforms have been required to collect information on hosts and report their income to HMRC under the Reporting Rules for Digital Platforms; according to HMRC, the first annual reports were due by 31 January 2025
- England does not have a national register for short-term lets or a dedicated C5 planning use class, although the UK Government has indicated that both are expected to be introduced during 2026
- Scotland requires short-term let operators to hold a licence, while Wales is due to launch its statutory register in autumn 2026
- If you have undeclared income from short-let accommodation, HMRC's Let Property Campaign allows landlords to come forward voluntarily, which can often result in lower penalties than if HMRC discovers the omission first
How Big is the UK Short-Let Accommodation Market Right Now?
The UK short-let accommodation market is larger than ever, with 100,911,620 guest nights booked through Airbnb, Booking.com and Expedia Group during 2025. According to the Office for National Statistics, this is an 11.5% increase from 90,507,070 guest nights in 2024.
These figures come from the ONS's Short-term lets through online collaborative economy platforms, UK bulletin, published on 24 June 2026. This bulletin recorded growth in short-let guest nights across every nation and region of the UK. Wales saw the strongest national increase, with guest nights rising 17.4% from 6,282,250 to 7,374,780, while the North East recorded the largest regional percentage increase, up 22.2% from 2,253,220 to 2,753,800.
London remained the UK's largest short-let market by volume, recording 21,557,480 guest nights. However, according to the Office for National Statistics, its 6.3% growth rate was the slowest of any UK region. At the local authority level, North Yorkshire recorded the largest increase, adding 452,960 guest nights (rise of 20.5%), followed closely by Cornwall with an increase of 449,450 guest nights (rise of 13.0%).
From these figures, we can conclude one thing very confidently. The demand for UK short-let accommodation remains strong. For many hosts, the bigger challenge is keeping up with the tax and reporting obligations that have come into force alongside this growth.
Has the Tax on Short-Let Accommodation Changed?
Yes, significantly. According to HMRC's policy paper Abolition of the Furnished Holiday Lettings tax regime, which was updated on 7 November 2024, the Furnished Holiday Lettings (FHL) regime ended on 6 April 2025 for Income Tax and Capital Gains Tax, and on 1 April 2025 for Corporation Tax. From the 2025/26 tax year onwards, income from UK short-let accommodation has been taxed under the same property business rules that apply to ordinary residential landlords.
The change that affects most landlords is mortgage interest relief. Instead of deducting mortgage interest from your rental income, you now receive a 20% basic rate tax reducer under section 272A of the Income Tax (Trading and Other Income) Act 2005, with the tax reduction calculated under section 274A. For higher rate and additional rate taxpayers, this often results in a higher tax bill than under the former FHL regime.
The abolition of the FHL regime also changed the rules for claiming tax relief on assets. As explained in HMRC's Property Income Manual, landlords can no longer claim capital allowances on furniture and equipment used in their short-let properties. Instead, relief is limited to the much narrower Replacement of Domestic Items Relief, which applies only when existing domestic items are replaced.
Finally, selling a former FHL property is now less tax-efficient. The special reliefs that previously applied to qualifying furnished holiday lets, including Business Asset Disposal Relief and rollover relief, are no longer available. Instead, any gain is generally taxed under the standard residential Capital Gains Tax regime, with rates of 18% or 24%, depending on your circumstances.
From 6 April 2025, a furnished holiday let is taxed as an ordinary residential let — the Section 24 finance-cost restriction applies, and Business Asset Disposal Relief on sale is gone.
The basic rate finance-cost reducer is 20% for 2025/26 and 2026/27, then rises to 22% from 2027/28 under the Finance Act 2026.
Worked Example: How the New Tax Rules Could Cost You £4,000
Meet Sarah. She owns a £650,000 holiday cottage in Cornwall in her own name, financed with a Buy-to-Let mortgage. The property generates £42,000 a year in rental income, while her annual mortgage interest costs £20,000. As a higher-rate taxpayer, Sarah is a good example of how the abolition of the FHL regime has affected many short-let landlords.
Before 6 April 2025, Sarah's property qualified as a Furnished Holiday Let. That meant she could deduct the full £20,000 of mortgage interest before calculating her taxable profit. As a result, she paid income tax on £22,000, giving her a tax bill of £8,800.
From the 2025/26 tax year, Sarah's property is taxed under the standard property income rules because the FHL regime has been abolished. As a result, the mortgage interest now falls within the finance cost restriction in section 272A of the Income Tax (Trading and Other Income) Act 2005. Instead of deducting the £20,000 from her rental income, she receives only a 20% tax credit.
Header | Before (FHL) | Now (Standard Property Rules) |
|---|---|---|
Taxable Rental Income | £22,000 (After Mortgage Interest) | £42,000 (Mortgage Interest Not deducted) |
Mortgage Interest Relief | Full deduction | 20% tax credit (£4,000) |
Income Tax Bill | £8,800 | £12,800 |
Nothing about Sarah's property has changed. She has the same cottage, the same mortgage and the same rental income. The difference is entirely down to the change in tax treatment. Her annual income tax bill increases by £4,000 simply because the special FHL rules no longer apply.
The changes do not end there. If Sarah later sells the property, she can no longer benefit from the Capital Gains Tax reliefs that were previously available to qualifying Furnished Holiday Lets, such as Business Asset Disposal Relief. On a gain of £200,000, a higher-rate taxpayer could pay roughly £28,000 more in Capital Gains Tax than would have been payable before the FHL regime was abolished.
Does HMRC Know About My Airbnb Income?
In most cases, yes.
Since 1 January 2024, online platforms such as Airbnb have been required to collect information about hosts under the UK's Reporting Rules for Digital Platforms, which implement the OECD's Model Reporting Rules. According to HMRC's guidance published on 1 August 2024 and updated on 22 October 2025, the platforms submitted their first reports to HMRC by 31 January 2025.
Those reports do not simply sit in a database. HMRC compares the figures reported by digital platforms with the income you declare on your Self Assessment Tax Return. It can also cross-check that information using its Connect data analytics system, which draws on data from sources such as the Land Registry, Council Tax records and financial institutions.
As a result, the old assumption that HMRC would overlook a few thousand pounds earned from a holiday cottage or Airbnb listing is no longer a safe one. Where the income reported by a platform does not match a taxpayer's Self Assessment return, HMRC may issue a "nudge" letter asking for an explanation or encouraging the taxpayer to review their tax affairs.
So, if your Airbnb or other short-let income has not been reported correctly, HMRC will find out. Reviewing your tax position before HMRC contacts you can leave you with more options than waiting for an enquiry to begin.
Do I Need to Register My Short-Let Accommodation?
It depends on where your property is located.
If your short-let is in England, the answer is not yet. The UK Government still intends to introduce a mandatory national registration scheme for short-term lets under the Levelling Up and Regeneration Act 2023. But, as of June 2026, it has not yet announced a firm launch date.
The same is true of the proposed C5 planning use class for short-term lets. Although the Government has consulted on introducing it, the new planning class has not yet come into force, and existing short-let properties have not been reclassified. If you have seen specific implementation dates reported elsewhere, treat them as proposed timelines rather than current law.
The rules are different elsewhere in the UK. In Scotland, anyone operating a short-term let has been required to obtain a licence from their local authority since October 2022. In Wales, the Visitor Accommodation (Register and Levy) Etc. (Wales) Act 2025 received Royal Assent in September 2025. So, according to the ONS, a mandatory register for all visitor accommodations in Wales is expected to become operational from autumn 2026, with local authorities also expected to gain the power to introduce a visitor levy from April 2027.
If your property is in Greater London, a separate rule already applies. Entire homes generally cannot be let on a short-term basis for more than 90 nights in a calendar year without planning permission. In addition, local planning authorities across England can use Article 4 Directions to remove certain permitted development rights, meaning planning permission may be required for short-term letting in specific areas.
Conclusion: What Should Short-Let Accommodation Owners Do Now?
The right next step depends on your circumstances.
If you have been declaring all of your short-let income correctly, now is a good time to review your 2025/26 tax position. Make sure your tax return reflects the post-FHL rules, and consider whether your current ownership structure is still the most tax-efficient.
If you have income from Airbnb or other short-let accommodation that has not been declared, including income from earlier tax years, it is usually better to act before HMRC contacts you. According to HMRC, the Let Property Campaign allows landlords to disclose undeclared rental income voluntarily, and those who come forward before an enquiry begins will often face lower penalties than those who wait to be discovered.
HMRC May Already Have Your Data. Disclose On Your Terms, Not Theirs.
Our Let Property Campaign (LPC) service handles the full voluntary disclosure process. We reconstruct your income year by year, calculate the tax, interest and penalties, and deal with HMRC from start to finish.
In one case, we reduced a £20,000+ exposure to £6,000 through a complete and well-evidenced disclosure.
FAQs
Short-let accommodation is a property rented out for short periods. It typically includes holiday cottages, serviced apartments, Airbnb properties, and other furnished accommodation booked for days or weeks instead of months or years.
Yes, short-term lets are legal in the UK, but the rules vary depending on where the property is located. Scotland requires operators to obtain a short-term let licence, while Wales is introducing a mandatory register from autumn 2026. In England, a national registration scheme is planned and some local planning restrictions already apply, particularly in Greater London.
There is no single legal definition of a short let that applies across the UK. In practice, a short let usually refers to accommodation rented for anything from one night to several weeks or months, rather than under a long-term residential tenancy. The exact meaning can vary depending on the legislation or regulatory regime being considered.
The 90-day rule applies to entire homes in Greater London. Without planning permission, an entire property generally cannot be let as temporary sleeping accommodation for more than 90 nights in a calendar year. The rule does not apply elsewhere in England, although local planning authorities may impose additional restrictions in certain areas through Article 4 Directions.
You can make a voluntary disclosure through HMRC's Let Property Campaign. Disclosing before HMRC opens an enquiry usually means lower penalties.
Possibly. There is no national night cap outside London, but sustained commercial letting can be a "material change of use" requiring permission. In Greater London, entire-home lets are capped at 90 nights a year without planning consent.
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