Holiday Let Mortgage Calculator — The Honest 2026 Reality

A holiday let mortgage is a specialist mortgage product for a property let out short-term to holidaymakers, rather than to a single long-term tenant. Lenders treat this differently from a standard buy-to-let, since short-term rental income is genuinely more seasonal and less predictable — a property might be fully booked in August and largely empty in February, which affects both the risk assessment and the affordability calculation a lender applies.

Running your numbers through a proper holiday let mortgage calculator matters more now than it did a couple of years ago, precisely because the tax picture behind these numbers changed so significantly in April 2025. A calculation that made sense under the old Furnished Holiday Lettings rules can look genuinely different once the real, current tax treatment is applied — and getting an accurate affordability check before committing to a purchase avoids discovering the gap after exchange, when there's far less room to renegotiate.

A genuinely common trap for prospective holiday let buyers in 2026 is relying on numbers, spreadsheets, or advice that predate the April 2025 abolition. Older online guides, forum threads, and even some out-of-date calculators still reference the old FHL tax benefits as if they remain available — full mortgage interest deduction, the 10% Business Asset Disposal Relief rate on sale, pension-qualifying earnings — none of which apply any longer.

A holiday let mortgage calculator that reflects the genuine, current rules serves two purposes at once: it checks whether the rental income realistically covers the mortgage under a lender's stress test, and it makes the real post-abolition tax position explicit, rather than leaving a buyer to discover the gap between expected and actual returns only after they've committed to the purchase.

The Furnished Holiday Lettings (FHL) tax regime was abolished from 6 April 2025, under the Finance (No.2) Act 2024. Before this, a qualifying holiday let was treated more like a trading business than an investment property, unlocking several genuine tax advantages unavailable to ordinary residential landlords. Since abolition, holiday let income is taxed under the same standard property income rules that apply to any other rental property — there is no separate, more favourable category anymore.

To qualify for the old FHL status, a property had to be available for letting at least 210 days a year, actually let commercially for at least 105 days, and not occupied by the same guest for more than 31 consecutive days for more than 155 days of the year. These thresholds are now largely irrelevant for tax purposes, though the property's short-term letting model itself remains unchanged — it's specifically the favourable tax treatment tied to meeting them that has gone.

There are no transitional provisions softening this change. The 2025/26 tax return, due by 31 January 2027, is the first return filed entirely under the new rules, and for many holiday let owners with mortgage debt, the resulting tax bill for that year will be materially higher than under the old regime.

Also lost: capital allowances on new furniture and equipment (replaced by the more limited Replacement of Domestic Items Relief), and eligibility to count holiday let profits as relevant earnings for pension contribution purposes.

Taken together, these changes shift holiday lets much closer to how ordinary buy-to-let property has been taxed for years, rather than treating them as a distinct, more favourable category. For a highly leveraged holiday let — a large mortgage relative to the property's value — the mortgage interest change in particular can have a genuinely significant effect on the owner's real, after-tax return, since income tax is now calculated before the interest cost is subtracted, with only a 20% credit applied afterward rather than the interest being deducted from taxable profit directly.

Lenders don't assess affordability against your actual mortgage rate — they apply a higher, stressed rate to check the rental income would still comfortably cover payments if rates rose. Combined with an Interest Cover Ratio requirement (rental income needing to reach, say, 145% of the stressed payment), this genuinely limits how much a lender will offer, sometimes below what a buyer's deposit and property value alone would suggest.

This margin exists specifically because holiday let income is genuinely more volatile than a standard tenancy. A long-term residential tenant pays broadly the same rent every month for the length of their tenancy; a holiday let earns most of its income across a handful of peak weeks, with quieter shoulder seasons and a genuinely uncertain winter. The stress test and ICR requirement together are the lender's way of making sure the mortgage still gets paid even in a below-average season, not just a typical or best-case one — which is exactly why running your own numbers through a realistic, rather than optimistic, annual rental figure matters so much before applying.

Alongside the tax changes, England is introducing a mandatory national registration scheme for short-term lets, and a new C5 planning use class that formally separates holiday lets from standard residential property. If you're on a residential mortgage but letting the property commercially as a holiday let, it's genuinely worth checking your lender's terms before a routine audit or the new registration scheme surfaces a mismatch.

These regulatory changes sit alongside the tax reform rather than replacing it, and together they represent a genuinely more formalised approach to short-term letting than existed even a few years ago. Digital reporting obligations under Making Tax Digital also begin extending to property income from April 2026, meaning holiday let owners will need to keep more detailed, more frequent digital records than the once-a-year Self Assessment return many were previously used to. None of this makes holiday letting unviable, but it does mean the administrative and compliance side of running one has genuinely increased alongside the tax changes.

Here's how the numbers work through a real holiday let mortgage calculator scenario. A £300,000 property, 25% deposit (£75,000), mortgage of £225,000 at 6.2%. Actual interest-only monthly payment: roughly £1,163. At the lender's 7.5% stress rate: roughly £1,406 a month. At a 145% ICR requirement, the lender needs rental income of roughly £2,039 a month, or £24,468 a year, to approve the loan. A realistic annual rental income of £24,000 sits just below this — a genuinely tight margin worth revisiting with a slightly larger deposit or a more conservative rental estimate before applying.

Official sources & further reading: read the HMRC policy paper on FHL abolition at GOV.UK, and general guidance at MoneyHelper. Compare against a standard buy to let mortgage calculator, or check the associated capital gains tax calculator for a future sale.