Compliance
Short-Term Let Licensing and Tax in Scotland
Running a short-term let in Scotland now involves two separate regimes that are easy to confuse: a mandatory licence from your council, and a tax treatment that changed significantly when the furnished holiday lettings rules were repealed.
Quick answer
What are the key takeaways?
You must hold a short-term let licence before taking bookings or receiving guests. A licence usually lasts three years.
Key takeaways
You must hold a short-term let licence before taking bookings or receiving guests. A licence usually lasts three years.
Operating without a licence is a criminal offence, with fines up to £2,500 and a one-year ban from reapplying.
The furnished holiday lettings tax regime was abolished from 6 April 2025 for income tax and CGT (1 April 2025 for corporation tax).
Short-term lets available for 140 nights or more a year can move from council tax to non-domestic rates.
A short-term let must hold a valid licence before it can qualify for the Small Business Bonus Scheme.
Who needs a short-term let licence?
Anyone providing accommodation to temporary guests in Scotland needs a licence from the relevant council before taking bookings or receiving guests. The scheme covers whole-property lets, room-only lets and home sharing, with different licence types depending on how the property is used.
Operating without a licence is a criminal offence. Penalties run to a fine of up to £2,500 and a ban from reapplying for a licence for one year — which for a property bought specifically to let short-term is a far more serious commercial risk than the fine itself.
What changed when the furnished holiday lettings regime was abolished?
For years, a qualifying furnished holiday let was treated broadly as a trade: full mortgage interest relief, capital allowances on furnishings, and access to capital gains reliefs such as Business Asset Disposal Relief and rollover relief.
That regime ceased to apply for tax years beginning on or after 6 April 2025 for income tax and capital gains tax, and 1 April 2025 for corporation tax. Income and gains from a short-term let now form part of an ordinary UK property business and are treated like any other rental income. In practice that means the finance cost restriction applies, capital allowances on furnishings are no longer available in the same way, and the CGT reliefs that made exiting a holiday let attractive have gone.
Council tax or non-domestic rates?
A self-catering property that is both available to let for 140 nights or more in a year and actually let for a set threshold generally moves out of council tax and into non-domestic rates, valued by the Scottish Assessors.
That switch is not automatically bad news. Once inside the rates system, a property with a low rateable value may qualify for the Small Business Bonus Scheme and pay nothing at all — but only where it holds a valid short-term let licence. An unlicensed property can end up with the worst of both outcomes.
What about planning permission and control areas?
Licensing and planning are separate. Some councils have designated short-term let control areas in which using a whole dwelling for short-term letting requires planning permission in its own right, in addition to a licence.
Glasgow and Edinburgh have both taken a notably firmer line than rural authorities, so a property strategy that works in the Highlands may not be viable in a city centre tenement. Check the position with the specific council before committing to a purchase.
How should short-term let income be reported?
Short-term let income is reported as part of your property business through Self-Assessment. Where the activity is genuinely a trade — serviced accommodation with substantial services, for example — a different treatment may apply, but that is a narrow route and should be tested carefully rather than assumed.
Making Tax Digital for Income Tax also brings qualifying property income into scope for digital record-keeping and quarterly updates, so hosts above the relevant income threshold need compatible software rather than a spreadsheet at year end.
Questions
What do people ask about short-term lets?
These answers cover the practical points clients commonly raise before asking Countify to review their own position.
Ask a different questionYes. A short-term let licence is required before you take bookings or receive guests, and Glasgow also operates planning controls that may require planning permission for whole-property short-term letting on top of the licence.
A licence usually lasts three years, after which it must be renewed. Existing licence holders should diarise the renewal, because letting on an expired licence carries the same criminal penalties as never having one.
It is a criminal offence. You can be fined up to £2,500 and banned from applying for a licence for a year, which effectively ends the letting business for that period.
No. Since the furnished holiday lettings regime was abolished from 6 April 2025, short-term lets fall within the ordinary property business rules, so the finance cost restriction applies in the same way it does to a standard buy-to-let.
If the property is available to let for 140 nights or more a year it will generally be assessed for non-domestic rates rather than council tax. With a low rateable value and a valid licence, the Small Business Bonus Scheme may then reduce the bill to nil.
Yes. Countify can work out the post-2025 tax position, compare holding the property personally against a company, deal with the rates and licensing interaction and prepare the Self-Assessment or company return.
Related advice
Which advice should you read next?
These related guides connect the next practical questions around this topic.
Section 24
Since April 2020, mortgage interest and finance costs are no longer deductible from rental income — instead landlords receive a 20% basic-rate tax credit.
Small Business Bonus Scheme
Premises with a rateable value up to £12,000 get 100% relief and pay no non-domestic rates at all.
MTD Income Tax
MTD for Income Tax is mandatory from April 2026 for self-employed and landlords with qualifying income above £50,000.
Related tools
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Related reading
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