How SDLT Applies to Holiday Lets

Stamp Duty Land Tax (SDLT) is charged on purchases of land and property in England and Northern Ireland. An SDLT return and any tax due must be submitted to HMRC within 14 days of the transaction’s effective date. In most cases the effective date is the completion date, but it can be earlier if the buyer takes possession or pays a substantial part of the purchase price before legal completion.

When you buy a holiday let or short-term rental property, you will generally pay SDLT at the higher rates for additional dwellings if:

• you already own a residential property anywhere in the world, and
• the new purchase is an additional residential property in England or Northern Ireland.

HMRC treats a holiday let as a residential property for SDLT purposes in most cases, even where it is run commercially as a short-term letting business. Business use alone does not reclassify a property as non-residential for SDLT. Buyers who already own another residential property will therefore usually pay the standard residential rates plus the additional dwelling surcharge.

Some buyers may also face the 2% non-UK resident surcharge on top of all other applicable rates, depending on their residence status and the structure of the purchase.

Current SDLT Rates for 2026

From 31 October 2024, the surcharge for additional residential dwellings increased from 3% to 5%. From 1 April 2025, the standard residential nil-rate threshold reverted from £250,000 to £125,000. Both changes apply to all completions in 2026. No further changes to SDLT rates or thresholds have been announced as of May 2026.

Standard Residential vs Higher Rates for Additional Dwellings

 

Source: HMRC. Rates effective from 1 April 2025. Non-UK-resident buyers pay an additional 2% surcharge on top of all rates shown above.

The higher rates apply to the entire purchase price on a progressive (banded) basis. Each rate applies only to the portion of the price falling within that band.

Worked Example: £400,000 Holiday Cottage

A buyer who already owns a residential property purchases a holiday cottage for £400,000. SDLT is calculated at the higher rates for additional dwellings:

 

Under the previous 3% surcharge and the higher temporary nil-rate threshold in place before April 2025, the same purchase would have produced a lower SDLT bill. The combined effect of the rate increase and the threshold reversion has raised purchase costs across most price bands.

The October 2024 Surcharge Increase

The government raised the higher rates for additional dwellings from 3% to 5% for transactions with an effective date on or after 31 October 2024 (Autumn Budget 2024).

Transitional rule: Where contracts were exchanged before 31 October 2024, the old 3% surcharge can still apply, provided the transaction completes without any variation of the contract or assignment of rights after that date. If the contract was changed after 31 October 2024, the new 5% rate will generally apply.

If your transaction straddled 31 October 2024, with exchange before but completion after, specialist SDLT advice is important. Whether the transitional relief applies depends entirely on the specific facts, and the financial difference can be significant.

The April 2025 Nil-Rate Threshold Change

On 1 April 2025, the standard residential nil-rate threshold reverted from £250,000 to £125,000. The higher temporary threshold had been in place since September 2022.

For holiday let investors completing in 2026, the combination of the 5% surcharge and the lower nil-rate threshold means higher SDLT costs compared with both the period before October 2024 and the temporary threshold period. No further SDLT threshold or rate changes have been announced for 2026.

Abolition of the Furnished Holiday Let Regime

The Furnished Holiday Let (FHL) tax regime was abolished:

• 6 April 2025 for Income Tax and Capital Gains Tax purposes
• 1 April 2025 for Corporation Tax purposes

Under the former regime, qualifying FHL properties benefited from a range of tax advantages not available to standard residential landlords. All of those advantages have now ended.

What Was Lost at Abolition

Full mortgage interest deduction Previously, mortgage interest on an FHL could be deducted in full from rental income. From April 2025, relief is restricted to a 20% basic rate tax credit, in line with other residential property.

Capital allowances FHL owners could claim capital allowances on fixtures, furniture and equipment. From April 2025, capital allowances are no longer available on new FHL expenditure. Replacement of Domestic Items Relief is available for certain moveable items (such as furniture, appliances and kitchenware), as it is for all residential landlords.

Business Asset Disposal Relief (BADR) FHL disposals previously qualified for BADR, taxing gains at 10% up to the £1 million lifetime limit. Following abolition, the standard residential property CGT rates apply: 18% for gains within the basic rate band and 24% for higher rate taxpayers.

Rollover and Gift Holdover Relief Gains on FHL disposals could previously be rolled over into new business asset purchases, or held over on gifts to connected persons. These reliefs are no longer available to former FHL owners on disposals after 5 April 2025.

Pension contribution treatment FHL profits counted as relevant earnings for pension tax relief purposes. From April 2025, they do not.

Anti-Forestalling Provisions

Where a contract for disposal was entered into on or after 6 March 2024 but the transaction completed on or after 6 April 2025 (1 April 2025 for companies), claims to BADR, Rollover Relief and Gift Holdover Relief will generally not be available unless specific conditions are met and a qualifying statement accompanies the claim.

What FHL Abolition Does Not Change: SDLT

The FHL regime never created a separate SDLT relief for holiday let purchases. Its abolition does not change how SDLT is calculated at the point of acquisition.

What it does change is the wider economics of ownership. With higher SDLT at purchase, fewer income tax advantages during ownership, and reduced reliefs on disposal, there is less room for error if the SDLT return is filed incorrectly. Getting the SDLT position right at the outset has become more important.

Multiple Dwellings Relief: Abolished, but Transitional Cases Remain

Multiple Dwellings Relief (MDR) was abolished for transactions with an effective date on or after 1 June 2024 (announced in the Spring Budget on 6 March 2024).

MDR allowed buyers of two or more dwellings in a single or linked transaction to calculate SDLT based on the average value of the dwellings rather than the total, often producing a lower liability.

For most purchases completing in 2026, MDR is not available.

Transitional rule: MDR remains available where the contract was exchanged on or before 6 March 2024, regardless of when the transaction completes, provided the transaction is not excluded. A transaction is excluded where:

• there is any variation of the contract after 6 March 2024, or
• there is an assignment of rights under the contract after that date, or
• the transaction is carried out by the exercise of an option, right of pre-emption or similar right arising after that date.

Buyers involved in older contractual arrangements should check the position carefully before filing. Claiming MDR on a return that is not eligible can trigger an HMRC enquiry.

The Six-Property Rule (Non-Residential Rates)

Where six or more dwellings are purchased in a single transaction, the buyer can elect to apply non-residential SDLT rates instead of the higher residential rates. Non-residential rates are generally lower and do not carry the additional dwelling surcharge.

This can be a useful planning point for portfolio acquisitions. The rules are technical and the correct outcome depends on the precise structure of the transaction. This should be reviewed carefully with specialist SDLT advice before completion.

Making Tax Digital: Now Live for Many Landlords

Making Tax Digital for Income Tax (MTD for ITSA) became mandatory from 6 April 2026 for sole traders and individual landlords whose qualifying gross income from self-employment and property combined exceeded £50,000 in the 2024 to 2025 tax year.

The threshold falls in subsequent years:

 

Source: GOV.UK. Qualifying income is gross income before expenses, from self-employment and property combined. Limited company landlords are not affected by MTD for Income Tax; corporation tax rules apply to companies.

Those who meet the threshold must use HMRC-compatible software to keep digital records and submit quarterly updates to HMRC covering income and expenses for each quarter. The annual self-assessment tax return is replaced by a final digital declaration. Quarterly submission deadlines are 7 August, 7 November, 7 February and 7 May.

Penalties: HMRC has confirmed it will not issue penalty points for late quarterly updates during the first year of MTD (covering 2026 to 2027). However, late payment penalties and penalties for late annual declarations can still apply in that first year. From April 2027, a points-based system applies: four penalty points trigger a £200 fine.

MTD does not affect SDLT directly, but it is part of a broader shift towards more frequent and transparent tax reporting for property owners.

Platform Reporting to HMRC

Digital platform reporting is now an established compliance feature for short-term rental owners. UK rules require certain digital platforms to collect seller data from 1 January 2024 and report relevant information to HMRC annually.

• Reports covering 2024 data were due by 31 January 2025
• Reports covering 2025 data were due by 31 January 2026

For hosts using platforms such as Airbnb and Vrbo, this means HMRC has substantially greater visibility over rental income earned through those channels. Platform reporting does not alter how SDLT is calculated on purchase, but it reinforces the need for correct income tax reporting and accurate SDLT filings.

Common SDLT Mistakes Holiday Let Buyers Make

Using standard residential rates instead of higher rates: Some buyers, and occasionally their conveyancers, overlook the 5% additional dwelling surcharge when buying a holiday let, particularly where the property is intended for commercial short-term letting rather than personal use.

Assuming commercial use makes the property non-residential: Business use of a property as a holiday let does not reclassify it as non-residential for SDLT purposes. The analysis is fact-specific and depends on the nature of the property itself, not solely the intended use.

Ignoring the non-UK resident surcharge: Buyers who do not meet the UK residence test for SDLT purposes must pay an additional 2% surcharge on top of all other applicable rates. Where a buyer is non-UK-resident, the combined effective surcharge on an additional dwelling is 7% above the standard residential rates. This is frequently missed.

Missing linked transaction rules: Connected purchases, such as multiple properties bought from the same seller or transactions involving connected parties, can affect how SDLT is calculated across the group. Each transaction must be considered in context, not in isolation.

Overlooking the six-property rule: Some portfolio buyers default to residential rates when purchasing six or more dwellings in a single transaction, unaware that they can elect non-residential rates, which may be significantly lower.

Incorrectly assessing mixed-use treatment: Where a property or land includes genuine non-residential elements, such as commercial outbuildings, commercial land, or agricultural land used for a commercial purpose, mixed-use SDLT rates may apply. These are lower than residential rates and are not subject to the additional dwelling surcharge. However, the classification must be supportable on the facts. Tribunals and HMRC have scrutinised aggressive mixed-use claims in recent years, and inserting a commercial arrangement into a transaction does not automatically change the property’s SDLT classification.

Can You Claim an SDLT Refund on a Holiday Let?

If you overpaid SDLT on a past holiday let purchase, you may be able to recover the difference.

There are two main routes:

Amending the SDLT return: You can amend a filed SDLT return within 12 months of the filing date. This is the simplest route where the amendment is clear-cut.

Overpayment relief claim Where the 12-month amendment window has passed, you may still be able to make a formal overpayment relief claim to HMRC. The time limit for overpayment relief is generally 4 years from the effective date of the transaction.

Potential grounds for a refund include:

• an error in the chargeable consideration used in the return
• incorrect property classification where mixed-use or non-residential SDLT rates should have applied
• failure to apply the correct surcharge rules
• incorrect treatment of a qualifying six-property transaction

Important: Any claim must be grounded in the actual facts and supported by documentation. A holiday let is not automatically entitled to any particular SDLT treatment, and claims should not be made on a generic or speculative basis. Incorrect or unsupported claims can trigger HMRC enquiries and may result in penalties.

Frequently Asked Questions

Is a holiday let treated as residential for SDLT?

In most cases, yes. HMRC treats a holiday let as a residential property for SDLT purposes even where it is run commercially as a short-term letting business. Business use alone does not change the SDLT classification. Buyers who already own another residential property will usually pay the higher rates for additional dwellings.

What SDLT surcharge applies to a holiday let in 2026?

From 31 October 2024, the higher-rate surcharge for additional residential dwellings is 5%, added on top of the standard residential rates. From 1 April 2025, the standard nil-rate threshold reverted to £125,000. Both apply to completions in 2026.

Does the abolition of the FHL regime change SDLT?

No, not directly. The FHL regime never created a separate SDLT relief for holiday let purchases. Its abolition from April 2025 does not change how SDLT is calculated at the point of purchase. It does affect the ongoing income tax and CGT treatment of ownership, which changes the overall economics of the investment.

Can I claim an SDLT refund on a previous holiday let purchase?

You may be able to amend your SDLT return within 12 months of the filing date. After that window closes, a formal overpayment relief claim can be made up to 4 years from the effective date of the transaction. Any claim must be based on the specific facts of your purchase and supported by documentation.

Does the 2% non-UK resident surcharge apply to holiday let purchases?

Yes. Where a buyer does not meet the UK residence test for SDLT, an additional 2% surcharge applies on top of all other applicable rates, including the 5% additional dwelling surcharge, producing a combined effective surcharge of 7% above the standard residential rates.

What is the six-property rule and how does it help portfolio buyers?

Where six or more dwellings are purchased in a single transaction, the buyer can elect to apply non-residential SDLT rates instead of the higher residential rates. Non-residential rates are lower and do not carry the additional dwelling surcharge. This is a technical election that depends on the precise structure of the transaction. Specialist advice before completion is essential.

Key Dates at a Glance

Summary

With the 5% surcharge now in place, the FHL regime abolished, MDR largely unavailable for new transactions, and Making Tax Digital creating new reporting obligations, the tax position of a holiday let investment in 2026 is more complex than it was a few years ago.

The cost of an incorrectly filed SDLT return, or of missing a legitimate planning point, can be significant. Buyers should take specialist advice on the specific facts of their transaction, particularly where the purchase involves multiple dwellings, mixed-use features, non-UK residence issues, or older contractual arrangements. If you are buying a holiday let or want an existing purchase reviewed, specialist SDLT advice can help ensure the filing position is accurate and defensible.

This article is for general information only and does not constitute professional tax or legal advice. SDLT is a technical area where outcomes depend on the specific facts of each transaction. Always seek professional advice before completing a purchase.