Quick Summary
- The 70/140-day rule decides your biggest bill — a Scottish holiday let available for 140+ days and actually let for 70+ days a year pays non-domestic rates (often £0 with Small Business Bonus relief) instead of council tax; miss the thresholds and you're back on council tax at the second-home premium, which is at least double the standard bill in every Scottish council
- The Furnished Holiday Lettings tax regime is gone — since 6 April 2025, holiday let profits are taxed like any other rental income: mortgage interest only earns a 20% credit, and there's no Business Asset Disposal Relief when you sell
- Buying and selling both carry Scottish-specific costs — the 8% Additional Dwelling Supplement applies on purchase above £40,000, and residential CGT applies on sale
- Use our Scottish Income Tax Calculator to see what your letting profit is actually taxed at — rental profit stacks on top of your other income at Scottish rates
Running a holiday let in Scotland now involves four separate tax systems — local, income, purchase and exit — and the rules for three of them changed within the last three years.
Quick Answer: A Scottish holiday let pays non-domestic rates instead of council tax only if it's available to let 140+ days and actually let 70+ days in the financial year — and with a rateable value of £12,000 or less, Small Business Bonus relief can take that bill to zero. Fall short and you pay council tax with the second-home premium (at least double). Letting profits are normal property income since the FHL regime was abolished in April 2025, taxed at your Scottish rates. Buying costs 8% ADS above £40,000; selling faces residential CGT.
Council tax or business rates: the 70/140 rule
This is the question behind most holiday-let tax searches, and the rule is precise. Your property counts as self-catering holiday accommodation — liable for non-domestic rates rather than council tax — only if, in the financial year (1 April to 31 March), it is:
- available to let for 140 days or more, and
- actually let for 70 days or more
Both tests, same year, every year. You evidence it to your local assessor through a self-catering declaration (the Scottish Assessors Association form), with evidence usually due by late May for the year just ended. Keep your booking records — this is not a box you tick once.
Why the difference is worth thousands
If you qualify for non-domestic rates: your bill is based on the property's rateable value, and the Small Business Bonus Scheme gives 100% relief where the rateable value is £12,000 or less (tapering away between £12,001 and £20,000, and subject to your cumulative Scottish rateable value being £35,000 or less). Many genuine small holiday lets pay nothing in local taxes. Note the 2026 revaluation introduced transitional caps for the self-catering sector — check your new rateable value with your council.
If you don't qualify: the property is a second home for council tax, and every one of Scotland's 32 councils now charges second homes at least double the standard bill. Since April 2026 the 100% cap on that premium has been lifted, so councils can set it higher — check your council's current policy. On a Band D property that's several thousand pounds a year of difference against a possible £0.
The 70-day test is actual lets, not availability. A cottage that's marketed year-round but only booked for 60 nights fails the test and flips back to council tax — with the premium. If your bookings are marginal, this cliff edge is the single most expensive line in your business plan.
Income tax: the FHL era is over
For decades, qualifying holiday lets enjoyed the Furnished Holiday Lettings (FHL) regime — full mortgage interest deduction, capital allowances on furnishings, and access to business reliefs. That regime was abolished on 6 April 2025. A Scottish holiday let is now taxed like any other residential rental:
| Tax treatment | Old FHL rules (pre-April 2025) | Now (2026/27) |
|---|---|---|
| Mortgage interest | Fully deductible | 20% tax credit only |
| Furnishing the property | Capital allowances | Replacement of domestic items relief only (like-for-like replacements, not the initial purchase) |
| Pension contributions | Counted as relevant earnings | Standard property income — it doesn't |
| Selling up | Business Asset Disposal Relief possible | Standard residential CGT |
Your letting profit — income minus allowable expenses like cleaning, agent fees, insurance, repairs and utilities — is property income taxed at Scottish rates, stacked on top of your salary or pension. If your gross property income is small, the £1,000 property income allowance can be used instead of claiming expenses.
Worked example. A Highland cottage grosses £16,000 in bookings. Cleaning, laundry, agent commission, insurance, utilities and repairs come to £6,000, leaving £10,000 of profit. For an owner whose salary already puts them in the Scottish intermediate band, that profit is taxed at 21% — £2,100 — before any mortgage interest credit. The same owner in the higher band pays 42% on it. Where the profit lands in the bands is the whole game:
Try it yourself
Add your letting profit on top of your other income and see the actual band it falls into — the difference between 21% and 42% on £10,000 of profit is £2,100 a year.
Open the Scottish Income Tax CalculatorNo sign-up required.
The licence you can't skip
Every holiday let in Scotland needs a short-term let licence from the local council — it's been mandatory since the scheme rolled out in 2022–24, and operating without one is an offence. Fees and conditions vary significantly by council (Edinburgh, with its planning-permission overlay in the city centre, is the strictest), so budget for the licence, the compliant safety certificates it demands, and renewal. There's no national fee to quote — check your council's schedule before you buy anything.
Buying: ADS makes the sums start 8% behind
A holiday let is by definition an additional dwelling, so the purchase carries the Additional Dwelling Supplement — 8% of the full purchase price on top of normal LBTT, on anything above £40,000. On a £250,000 cottage that's £20,000 of ADS before standard LBTT. It's the single biggest reason Scottish holiday-let yields need checking with a cold shower first — our ADS guide covers the exemptions and the 36-month reclaim rules.
Selling: residential CGT, no business relief
Since the FHL abolition there is no Business Asset Disposal Relief on a holiday let sale. Gains face residential property CGT, reportable and payable within 60 days of completion. Work the exit numbers before you buy, not after:
Try it yourself
Model the gain on a future sale — including the split-year planning options — before the property is even bought.
Open the Capital Gains Tax CalculatorNo sign-up required.
Holiday let vs standard buy-to-let in Scotland (2026/27)
| Holiday let | Standard buy-to-let | |
|---|---|---|
| Local tax | NDR if 70/140 met (often £0 with SBBS); else council tax + premium | Tenant pays council tax |
| Licence | Short-term let licence, per council | Landlord registration |
| Tenancy law | None (licence conditions instead) | Private Residential Tenancy + rent controls |
| Income tax | Normal property income | Normal property income |
| ADS on purchase | 8% | 8% |
| Void risk | Seasonal, weather-shaped | Long-term tenant |
The tax gap that used to justify holiday lets over standard lets has mostly closed. What's left is a hospitality business with better gross yields, more work, a licensing regime and a cliff-edge local tax test.
The demand side matters more than the tax side
The 70-day test makes occupancy a tax issue, not just a revenue one. Before buying in an area, check what actually pulls visitors there and how seasonal it is — our sister site TripSCOT covers what visitors do in every Scottish region, which is a decent proxy for whether a cottage books in November as well as July:
Frequently Asked Questions
Do I pay council tax on a holiday let in Scotland?
Only if it fails the self-catering test. If the property is available to let for 140+ days and actually let for 70+ days in the financial year, it moves onto non-domestic rates instead. If it misses either threshold, it pays council tax as a second home — at least double the standard bill in every Scottish council.
How do I prove my holiday let meets the 70-day rule?
Through a self-catering declaration to your local assessor (the Scottish Assessors Association publishes the form), backed by booking evidence, with submissions usually due by late May for the financial year just ended. Keep booking platform statements and your own records — the assessor can ask.
Is a holiday let still more tax-efficient than a buy-to-let?
Far less than it used to be. Since the FHL regime ended in April 2025, income tax treatment is identical. The remaining edge is the possibility of paying no local taxes at all via non-domestic rates plus Small Business Bonus relief — real money, but conditional on hitting the letting thresholds every single year.
Does the 8% ADS apply to holiday lets?
Yes — a holiday let is an additional dwelling, so ADS applies on purchases above £40,000 at 8% of the full price, on top of standard LBTT. There's no holiday-let exemption.
What happens if my bookings fall short one year?
The property flips back to council tax for that period — with the second-home premium — and you'd re-qualify for non-domestic rates when you next meet both thresholds. The change isn't optional or discretionary; it follows the evidence you submit to the assessor.
Do I need a licence to run a holiday let in Scotland?
Yes. Short-term let licensing is mandatory across Scotland, administered per council with locally set fees and conditions, and some areas (notably Edinburgh) also require planning permission. Operating without a licence is an offence — factor licence and compliance costs into the business plan.
Related Articles
- Additional Dwelling Supplement Scotland — the 8% ADS in full, exemptions and reclaims
- Buy-to-Let Tax Scotland — the standard-let comparison in detail
- Is Buy-to-Let Worth It in Scotland in 2026? — the yield maths
- Scottish Capital Gains Tax Guide — what you'll face on exit
- Cost of a Trip to Scotland — the other side of the counter: what your guests are budgeting
This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax rates and thresholds can change — always verify current rates with Revenue Scotland, HMRC, or mygov.scot, and speak to a qualified financial adviser for advice specific to your circumstances.
Sources: mygov.scot — Non-domestic rates for self-catering accommodation, mygov.scot — Small Business Bonus Scheme, GOV.UK — Furnished holiday lettings tax regime abolition, Revenue Scotland — Additional Dwelling Supplement, gov.scot — Council Tax premium on second homes