Holmes was released by Luton in July 2003 after the offer of a new contract was withdrawn because of financial difficulties at the club, but he continued to train with the team and eventually signed a contract in November. His first appearance of the season came after starting in Luton's 0–0 draw at Holmes' former club Sheffield Wednesday, before scoring his first goal on 10 January 2004 with a header in a 2–2 draw with Rushden & Diamonds. Holmes was the oldest central midfielder in the team after starting in the FA Cup match against Tranmere Rovers, due to other players being injured, during which he gave away the possession for Micky Mellon to score the winner for Tranmere in the 81st minute. He finished 2003–04 with 20 appearances and scored three goals. Luton won promotion to the Championship in 2004–05 after winning the League One title, while Holmes made 20 appearances and scored three goals. Following this achievement, he signed a new one-year contract with the club in June 2005.