I'm looking at buying a holiday let in 2025. With potential SDLT changes for second homes in 2026, should I rush the purchase now or wait to see if the rules around Furnished Holiday Lets (FHLs) and the higher rate of SDLT might be different/more favourable then?
Quick Answer
The decision to purchase a holiday let now or later hinges on current Stamp Duty Land Tax (SDLT) rates, the uncertain future of Furnished Holiday Let (FHL) tax advantages beyond April 2025, and local council tax policies on second homes. Investors should model profitability under various scenarios.
## Understanding SDLT for Holiday Lets Before Anticipated 2026 Changes
When considering a holiday let purchase, it is crucial to understand the current Stamp Duty Land Tax (SDLT) framework, especially for transactions occurring in 2025. As of August 2026, the additional dwelling / investor surcharge is 5% on top of the base residential rate for each band. This means a buy-to-let or second property, including holiday lets, pays 5% on the £0-£125k portion, 7% on the £125k-£250k portion, 10% on the £250k-£925k portion, 15% on the £925k-£1.5M portion, and 17% above £1.5M. This surcharge applies unless the property falls under specific commercial use criteria for SDLT, which is often not the case for standard holiday lets.
For example, on a £300,000 holiday let purchase in 2025, the SDLT calculation would be: (£0-£125k at 5% = £6,250) + (£125k-£250k at 7% = £8,750) + (£250k-£300k at 10% = £5,000), totalling £20,000. This is a significant upfront cost that directly impacts the overall return on investment. The key distinction for SDLT purposes is whether the property is considered residential or commercial, with most holiday lets falling into the residential category unless they are part of a larger commercial operation.
## Current Tax Considerations for Holiday Lets in 2025
Beyond SDLT, investors need to be aware of other tax implications for holiday lets. From April 2025, councils can charge up to a 100% Council Tax premium on furnished second homes. This means a property with a standard Council Tax bill of £1,800 per year could see that increase to £3,600 per year, adding £150 per month to holding costs. This discretionary power means local council policies must be checked.
**Example 1: Holiday Let subject to premium**
* A holiday let property with a standard Council Tax Band D charge of £2,200 annually, located in an area where the council applies a 100% premium, would incur a £4,400 annual Council Tax bill from April 2025.
**Example 2: Holiday Let qualifying for business rates**
* A holiday let available for 140+ days per year and actually let for 70+ days may qualify for business rates instead of Council Tax. If it has a rateable value below £15,000, it could qualify for 100% Small Business Rate Relief, effectively paying no property tax, subject to local authority conditions.
Furthermore, rental income from a holiday let, if treated as a Furnished Holiday Let (FHL) under current rules, is subject to income tax. Basic rate taxpayers pay 22%, higher rate 42%, and additional rate 47% from April 2027. Unlike standard buy-to-lets, FHLs currently allow full mortgage interest deductibility against rental income and qualify for Capital Gains Tax (CGT) reliefs such as Business Asset Rollover Relief or Gift Hold-Over Relief. This is a critical distinction from Section 24, which restricts interest relief for regular residential landlords to a 20% tax credit.
## Potential Future Changes and Risks of Waiting
The government has signalled potential changes to Furnished Holiday Let (FHL) tax rules from April 2026, aiming to level the playing field between long-term and short-term lets. While the specifics are not yet confirmed, waiting to see if these changes are 'more favourable' carries inherent risks. There is no guarantee that any new regime will offer the same, or better, tax benefits than the current FHL rules.
For instance, if FHL rules are abolished or significantly altered to mirror standard residential property taxation, investors could lose benefits such as full mortgage interest deductibility and CGT reliefs. This would increase the overall tax burden and reduce net income, making some deals less viable. A property purchased in 2025 under the current FHL regime would continue to benefit from those rules until any legislative change takes effect.
If you purchase now and the rules change adversely in 2026, you will own a property potentially with reduced tax advantages. Conversely, if you wait and the changes are neutral or worse, you will have missed out on potential rental income for a year. The uncertainty surrounding the proposed changes means that 'waiting for more favourable rules' is a speculative approach.
## Investor Rule of Thumb
Invest based on the current tax and regulatory framework, rather than speculating on future unconfirmed legislative changes.
## What This Means For You
The current environment for holiday lets requires careful consideration of upfront costs like the SDLT surcharge and ongoing costs like potential Council Tax premiums. While FHL rules offer advantages, their future is uncertain. Most landlords do not make good investment decisions by waiting for speculative policy changes; they make them by analysing current numbers and acting decisively. If you want to understand how current tax rules impact your specific holiday let deal, this is exactly what we analyse inside Property Legacy Education.
Steven's Take
The core of property investment is making decisions based on known facts, not speculation. While the talk of FHL rule changes in 2026 is out there, there's no concrete benefit guaranteed. What we do know is the current SDLT and Council Tax premiums. If a deal stacks up today under the existing rules, including the 5% additional SDLT surcharge and potential 100% Council Tax premium, then you're making an informed decision. Waiting for a 'more favourable' future is a gamble that could see you paying more, or missing opportunities altogether, if the changes aren't what you expect.
What You Can Do Next
1. Calculate Current SDLT Liability: Use gov.uk/stamp-duty-land-tax to calculate the exact SDLT payable on your target holiday let, incorporating the 5% additional dwelling surcharge.
2. Research Local Council Tax Policy: Check the specific local council's website where your holiday let is located to determine their Council Tax premium policy for second homes from April 2025.
3. Consult a Tax Advisor: Engage a property tax specialist to understand the implications of current Furnished Holiday Let (FHL) rules versus standard buy-to-let taxation, and discuss the potential impact of future changes.
4. Conduct a Detailed Financial Projection: Model your potential rental income, operating costs, and tax liabilities based on both current FHL rules and a scenario where FHL benefits are removed, to assess the deal's viability under different outcomes.
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