If you let a holiday cottage, a coastal flat or a cabin on a short-term basis, two big changes now land on top of each other. The furnished holiday lettings (FHL) tax regime was abolished from 6 April 2025, and Making Tax Digital (MTD) for Income Tax began on 6 April 2026. The question we hear most from holiday-let owners is simple: where does my holiday income sit now, and does it drag me into MTD?
The short answer is that your old FHL income is now ordinary property income, and it counts toward the threshold that decides whether you must use MTD. That can pull holiday-let owners into the new digital regime sooner than they expect.
This guide explains how former FHL income fits into MTD for Income Tax, how it is reported, and what you actually need to do. It is written for individual landlords who let UK or overseas holiday property. We will not rehash the abolition rules themselves, you can read our dedicated pieces on that, but we will show how the two changes interact.
Does my furnished holiday let income count toward MTD?
Yes. From 6 April 2025 your holiday-let income is ordinary property income, so it counts toward your MTD qualifying income and is reported inside your property-business updates, not as anything separate.
HMRC measures your "qualifying income" as the total gross income you get in a tax year from self-employment and property combined. Gross means before you deduct any expenses, what HMRC calls your turnover. Because the FHL regime no longer exists, the rent from your holiday let is simply part of your property turnover, and it is added to any other rental income you receive when HMRC works out whether you cross the MTD threshold.
That matters because the old separate FHL treatment used to make holiday lets feel like a distinct activity. It is not distinct any more. For MTD, a holiday cottage and a buy-to-let flat are the same kind of income.
What changed when the FHL regime was abolished?
The FHL tax regime was abolished with effect from 6 April 2025 for Income Tax and Capital Gains Tax. In HMRC's words, income and gains from a furnished holiday let now "form part of the person's UK or overseas property business" and are "treated in line with all other property income and gains". The measure "removes the specific tax treatment and separate reporting requirements for FHLs".
We are not covering the wider consequences here, the loss of capital allowances, the finance-cost restriction now applying, the changes to capital gains reliefs and pension-relevant earnings. Those are covered in our companion guidance for furnished holiday letting owners and our wider landlords resources.
The single point that matters for MTD is this: once the special regime is gone, your holiday income is just property income. So it behaves like all your other rent for the purposes of the digital rules.
When do I have to start using MTD for Income Tax?
MTD for Income Tax is being phased in by qualifying income, and the date you join depends on which threshold you cross and the tax year HMRC measures.
| Qualifying income over | Based on tax year | You must use MTD from |
|---|---|---|
| £50,000 | 2024/25 | 6 April 2026 |
| £30,000 | 2025/26 | 6 April 2027 |
| £20,000 | 2026/27 | 6 April 2028 |
Your qualifying income is your gross self-employment and property income added together. Income from employment (PAYE), private or State Pension, partnership profit shares, and dividends does not count toward the threshold. Those sources are still reported, they just are not part of the qualifying-income test.
So a holiday-let owner with a day job is tested only on their property (and any self-employment) turnover. The salary does not push them over the line, but it is still declared at the end of the year.
Here is the part holiday-let owners often miss. Your former FHL turnover now stacks on top of your other rental turnover. If you previously thought of the holiday let as a separate thing that sat below a threshold, that mental model no longer holds. It all aggregates.
How is my holiday let reported under MTD?
Under MTD, all your UK property is treated as one property business, and you send quarterly updates for that business through compatible software. UK property and foreign property are separate businesses, so an overseas holiday let is reported separately from your UK lettings.
What this means in practice:
- A UK holiday cottage and a UK buy-to-let are the same property business. One set of quarterly updates covers both.
- A holiday villa abroad is a separate overseas property business with its own updates.
- A sole-trade activity (say, a consultancy) is a separate self-employment business again, with its own updates.
Each quarterly update is a cumulative year-to-date summary of income and expenses for that business, not a mini tax return. You are sending running totals, which the software builds up as the year goes on.
After the tax year ends, you make a final declaration through your software. This replaces the Self Assessment return. It is where you bring in your other income (employment, pensions, dividends, savings), claim reliefs and allowances, and confirm your figures. The final declaration is due by 31 January after the end of the tax year, the same date Self Assessment used.
Worked example: when a holiday let triggers MTD
Illustrative example. Sofia owns a holiday cottage in Cornwall and a buy-to-let flat in Bristol. In 2024/25 the cottage produced £42,000 of gross rent and the flat produced £15,000. She has no self-employment.
Her qualifying income is the gross total of both: £42,000 + £15,000 = £57,000. That is over the £50,000 threshold for 2024/25, so Sofia must use MTD for Income Tax from 6 April 2026.
Because both properties are in the UK, they form one UK property business. Sofia sends one set of quarterly updates covering the combined income and expenses, then a single final declaration by 31 January 2028 for the 2026/27 tax year.
Illustrative example. Raj runs a small carpentry sole trade with £35,000 gross turnover and lets one holiday chalet in the Lake District for £20,000 gross. He aggregates the two: £35,000 + £20,000 = £55,000, which is over £50,000 for 2024/25.
Raj is mandated from 6 April 2026 too, but he has two businesses: one self-employment and one UK property. He sends two sets of quarterly updates, then one final declaration pulling everything together. Note that under the old FHL rules the chalet alone might have felt like a separate, lightly taxed activity. Now it is simply property income that helped tip Raj over the threshold.
Your MTD quarterly deadline calendar
Quarterly update periods follow the tax year, and the standard deadlines are fixed. Each update is cumulative from 6 April to the end of that period.
| Quarter | Period covered | Standard deadline |
|---|---|---|
| Q1 | 6 April to 5 July | 7 August |
| Q2 | 6 April to 5 October | 7 November |
| Q3 | 6 April to 5 January | 7 February |
| Q4 | 6 April to 5 April | 7 May |
| Final declaration | Whole tax year | 31 January (following the tax-year end) |
So for the first mandated year, 2026/27, the first quarterly update deadline is 7 August 2026 and the final declaration is due by 31 January 2028. You can also choose "calendar quarter" periods in some software if that suits your bookkeeping better, but the standard quarters above are the default.
What records and software do I need?
MTD requires you to keep digital records and to use digital links between programs. You cannot manually copy and paste figures from one system to another and call it MTD-compliant. The data has to flow digitally.
If you already keep your holiday-let bookkeeping in a spreadsheet, you do not necessarily have to abandon it, but you will need bridging software to connect that spreadsheet to HMRC so the digital link is preserved.
We would steer you away from picking software off a forum recommendation. HMRC maintains a live list of compatible software for MTD for Income Tax, and the right choice depends on whether you have one property, several, or a mix of property and self-employment. This is exactly the kind of decision our landlords team helps with, alongside ongoing bookkeeping support so the quarterly updates are not a scramble.
If you genuinely cannot use digital tools, for example because of age, disability or location, you may be able to apply for a digital-exclusion exemption from HMRC. That is a formal application, not an automatic opt-out.
What happens if I miss a deadline?
MTD uses a points-based late-submission penalty system. You get one penalty point each time you miss a submission deadline. Once you reach the points threshold, HMRC charges a £200 penalty, and a further £200 each time you miss another deadline while you remain at the threshold. You only get one point per deadline, even if you run more than one business.
Late payment is charged separately. There is no penalty if you pay within 15 days. After that, late-payment penalties build up based on how late you are and how much is outstanding, with interest accruing on top. Because the exact percentages and any first-year easements can change, check HMRC's penalties guidance for the figure that applies to your situation rather than relying on a number you saw last year.
The practical takeaway: four quarterly deadlines plus a final declaration is more touchpoints than one annual return, so the cost of falling behind is a steadier drip of penalty points rather than one big miss.
Frequently asked questions
Does abolishing the FHL regime mean my holiday let escapes MTD?
No, the opposite. Before abolition, FHL income had its own treatment. Now it is ordinary property income, so it counts toward your MTD qualifying income and is reported in your property-business quarterly updates like any other rent.
My holiday let income is below £50,000. Am I safe from MTD?
Not necessarily. Your qualifying income aggregates all your gross self-employment and property income. If your holiday let plus other rental or sole-trade income crosses a threshold, you are in scope even if the holiday let alone is small. The £30,000 tier applies from April 2027 and the £20,000 tier from April 2028.
Is my UK holiday let a separate business from my buy-to-let under MTD?
No. All your UK property, holiday lets and standard lettings together, is one UK property business with one set of quarterly updates. Only foreign property is a separate business from your UK property.
Are quarterly updates four mini tax returns?
No. Each quarterly update is a cumulative year-to-date summary of income and expenses sent through software. The reliefs, allowances and adjustments are sorted at the final declaration, which replaces your Self Assessment return and is due by 31 January after the tax-year end.
Do I still report my salary and pension if a holiday let puts me into MTD?
Yes. Employment, pension, dividend and savings income do not count toward your qualifying-income threshold, but they are still reported, at the final declaration each year.
Can I keep using my holiday-let spreadsheet?
You can, but only if it connects to HMRC through bridging software so the digital link is preserved. MTD does not allow manual copy-paste between programs.
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Talk to Zmartly about your holiday let and MTD
Holiday-let owners are some of the most likely to be caught out by MTD, because the abolished FHL regime quietly turned holiday income into threshold-counting property income. If you are not sure whether you are mandated, when, or how to set up compliant quarterly reporting, we can map it out for you. Talk to our landlord accounting team and we will tell you exactly where you stand and what to file.
