Understanding SDLT on Furnished Holiday Lettings After April 2025
The short answer is: yes, stamp duty land tax (SDLT) still applies to furnished holiday lettings (FHLs) after the abolition of the FHL regime from April 2025. However, whether the 5% additional property surcharge applies depends on whether the property is treated as a residential or non-residential (commercial) property for SDLT purposes.
This distinction matters because the 5% surcharge only applies to additional residential properties. If your FHL is classified as commercial or mixed-use for SDLT, you may avoid the surcharge entirely. Let's break this down with a worked example for a £400,000 FHL purchase.
What Changed in April 2025 for Furnished Holiday Lettings?
The Furnished Holiday Lettings regime was abolished from 6 April 2025. This means:
- FHLs are no longer treated as a separate class of property for tax purposes
- Capital allowances on FHL assets are no longer available
- Business Asset Disposal Relief (BADR) via FHL status is no longer available
- FHL income is now treated as standard property income under the property income rules
However, the abolition does not automatically change how SDLT is calculated. SDLT classification depends on the nature of the property at the time of purchase, not the tax regime that applies to the income.
How SDLT Applies to Furnished Holiday Lettings
For SDLT purposes, a property is classified as either:
- Residential, includes buy-to-let properties, second homes, and holiday lets that are used primarily as dwellings
- Non-residential or mixed-use, includes commercial properties, hotels, guest houses, and properties used for trade
If your FHL is a standard holiday cottage or apartment that is let out for short-term stays but remains a dwelling, HMRC will typically treat it as residential property for SDLT purposes. This means:
- Standard SDLT rates apply (0% up to £250,000, 5% on £250,001, £925,000, etc.)
- The 5% additional property surcharge applies if you already own another residential property
- First-time buyers may qualify for relief if they meet the conditions
If your FHL is more commercial in nature, for example, a guest house with multiple letting units, a hotel, or a property that is used for trade, it may be classified as non-residential or mixed-use. In that case:
- Commercial SDLT rates apply (0% up to £150,000, 1% on £150,001, £250,000, 5% above £250,000)
- The 5% additional property surcharge does NOT apply
- This can result in significantly lower SDLT costs
Worked Example: £400,000 FHL Purchase
Let's look at a realistic example. Sarah owns one buy-to-let property in Manchester and wants to buy a £400,000 holiday cottage in Cornwall to let out as a furnished holiday let. She already owns a residential property, so she is not a first-time buyer.
Scenario A: FHL Treated as Residential Property
If the cottage is a standard dwelling (e.g., a 3-bedroom house with a kitchen, bathroom, and living areas), HMRC will treat it as residential. Sarah already owns another residential property, so the 5% surcharge applies.
SDLT calculation:
- 0% on first £250,000 = £0
- 5% on next £150,000 (£250,001 to £400,000) = £7,500
- 5% surcharge on entire £400,000 = £20,000
- Total SDLT: £27,500
Note: The surcharge is calculated on the full purchase price, not just the portion above £250,000. This is standard for additional residential properties.
Scenario B: FHL Treated as Non-Residential or Mixed-Use
If the property is a guest house with separate letting units, or a property that includes commercial space (e.g., a shop below the holiday let), it may be classified as non-residential or mixed-use. In this case, the 5% surcharge does not apply.
SDLT calculation:
- 0% on first £150,000 = £0
- 1% on next £100,000 (£150,001 to £250,000) = £1,000
- 5% on remaining £150,000 (£250,001 to £400,000) = £7,500
- Total SDLT: £8,500
The difference is stark: £27,500 vs £8,500. That's a saving of £19,000 simply based on the SDLT classification.
How to Determine Your FHL's SDLT Classification
HMRC looks at the physical characteristics and use of the property at the time of purchase. Key factors include:
- Does the property have self-contained living facilities (kitchen, bathroom, bedrooms)?
- Is it marketed as a holiday let or as a commercial guest house?
- Does it have multiple letting units or is it a single dwelling?
- Is there any commercial element (e.g., a shop, restaurant, or office)?
If your FHL is a standard holiday cottage or apartment, it will almost certainly be treated as residential. If it is a larger property with multiple units or a mixed-use element, you may have grounds to argue for non-residential classification.
We recommend speaking to a specialist property accountant or solicitor who can review the specific facts of your purchase and advise on the correct SDLT treatment. You can contact our team for a consultation.
What About the 5% Surcharge on Additional Properties?
The 5% surcharge on additional residential properties applies to purchases of residential property where the buyer already owns one or more residential properties. This surcharge was increased from 3% to 5% on 31 October 2024.
For FHLs treated as residential, the surcharge applies in the same way as for any other buy-to-let property. There is no special exemption for holiday lets simply because they are let out on a short-term basis.
However, if you are buying an FHL as your only residential property (i.e., you do not own any other residential property), the surcharge does not apply. You would pay standard residential SDLT rates.
Current Rules for Furnished Holiday Lettings Post-Abolition
Understanding the current rules for furnished holiday lettings is essential for any landlord considering this type of investment. Here are the key points:
- Income tax: FHL income is now treated as standard property income. You cannot claim capital allowances on furniture or equipment. Instead, you claim the replacement of domestic items relief.
- Mortgage interest: Section 24 applies in full. Mortgage interest relief is restricted to a 20% tax credit, not deducted from rental income.
- Capital gains tax: When you sell, you pay CGT at 18% (basic rate) or 24% (higher rate) on residential property gains. The annual exempt amount is £3,000.
- SDLT: As discussed above, the classification depends on the property's nature, not the FHL regime.
- Making Tax Digital: From 6 April 2026, landlords with gross property income over £10,000 must file quarterly digital updates. This includes FHL income. See our MTD for landlords guide for details.
How Much Tax to Pay on a Furnished Holiday Let
The question of how much tax to pay in a furnished holiday let depends on your overall income and property portfolio. Here's a simplified example:
Let's say your FHL generates £25,000 in rental income per year. Your allowable expenses (cleaning, utilities, insurance, repairs, letting agent fees) total £8,000. Your net rental profit is £17,000.
If you are a basic rate taxpayer (20%), you would pay £3,400 in income tax on this profit. However, if you have other income that pushes you into the higher rate band (40% from £50,271 in 2026/27), the tax on the FHL profit would be £6,800.
Remember: from April 2027, separate property income tax rates apply, 22% basic, 42% higher, and 47% additional rate on property income. This is a major change that will affect all landlords, including FHL owners.
Can You Avoid SDLT on a Furnished Holiday Let?
There is no blanket exemption from SDLT for furnished holiday lettings. However, there are ways to potentially reduce or avoid the surcharge:
- Purchase through a company: If you buy the FHL through a limited company, the SDLT rates are the same as for individuals. However, the company may benefit from corporation tax rates (19% or 25%) instead of income tax. See our buy-to-let limited company guide for more.
- Mixed-use classification: If the property has a commercial element, you may qualify for mixed-use SDLT rates, which avoid the surcharge.
- First-time buyer relief: If you are a first-time buyer and the FHL is your only residential property, you may qualify for relief on purchases up to £625,000.
- Multiple dwellings relief: If the FHL consists of multiple self-contained units, you may be able to claim multiple dwellings relief, which can reduce the effective SDLT rate.
Each of these options has specific conditions and should be explored with a professional. Our property accounting services can help you structure your purchase tax-efficiently.
Practical Steps for FHL Investors
If you are considering buying a furnished holiday let after April 2025, here are the steps you should take:
- Determine SDLT classification: Work with a solicitor or accountant to confirm whether the property is residential or non-residential for SDLT purposes.
- Calculate SDLT costs: Use our SDLT calculator to estimate your tax liability under different scenarios.
- Review your portfolio: If you already own other residential properties, factor in the 5% surcharge.
- Consider incorporation: For larger portfolios, a limited company structure may offer tax advantages. See our incorporation guide.
- Plan for MTD: From April 2026, you will need to file quarterly updates if your gross property income exceeds £10,000. Start preparing your digital records now.
Final Thoughts
The abolition of the FHL regime from April 2025 has not removed SDLT from furnished holiday lettings. Whether you pay the 5% surcharge depends on the property's classification as residential or non-residential, not on its holiday let status.
For most standard holiday cottages and apartments, the property will be treated as residential, meaning the surcharge applies if you already own another residential property. For more commercial operations, you may avoid the surcharge entirely.
If you are unsure about your specific situation, speak to a specialist property accountant. We help landlords and investors across the UK, including in London, Manchester, Birmingham, and Edinburgh, navigate these complex rules. Get in touch to discuss your FHL purchase.