British holiday-makers generated roughly 100 million overnight stays in domestic holiday accommodation in 2023, and average turnover per holiday let owner reached £24,700 in 2024. But the tax and regulatory landscape has shifted in ways that change the calculation for anyone thinking about buying a holiday home now. The Furnished Holiday Letting regime was abolished in April 2025, short-term rental licensing is rolling out across the UK, and stamp duty surcharges have climbed. What looked like a straightforward investment a few years ago now comes with a thicker folder of paperwork and a different tax bill.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The staycation boom that took off after the pandemic hasn’t faded — bookings rose 2.2% in 2024, and regions like the Lake District and the Cotswolds saw average turnovers above £40,000. But the financial mechanics underneath have changed. Mortgage rates have eased slightly — the Bank of England cut its base rate to 4% — while house prices edged up 0.4% in July 2025. The question isn’t whether people still want holiday homes. It’s whether the numbers still work for you after the tax changes, the new licensing costs, and the reality of managing a property that might sit empty for half the year. Here’s what you actually need to know.
The central concept here is the Furnished Holiday Letting (FHL) regime — the now-abolished tax framework that previously gave holiday let owners capital allowances, full mortgage interest deductions, and access to Capital Gains Tax reliefs. Understanding what replaced it is the starting point for any realistic financial plan.
What I tend to notice when people first look at holiday homes is that they focus on the peak-season weekly rate — £3,500 for a Cornish cottage in August sounds great — without running the full-year numbers. The gap between gross revenue and what actually lands in your bank account is wider than most expect.
What a UK holiday home actually costs — the full picture
The purchase price is only the first number. For a non-resident buying an additional dwelling, stamp duty alone carries a 5% surcharge for second homes plus a 2% surcharge for non-UK buyers — 7% on top of standard rates. On a £500,000 property, that’s £35,000 in stamp duty before you’ve paid a solicitor or a surveyor.
Ongoing costs eat into income just as heavily. Specialist holiday let insurance runs £800–2,500 a year. If you use a management company — and most owners who live more than an hour away do — expect to pay 20–30% of gross revenue plus cleaning fees per booking. Maintenance runs at roughly 1.5–2% of the property’s value annually. A £400,000 cottage costs £6,000–8,000 a year just to keep in shape.
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| Cost item | Typical amount | Notes |
|---|---|---|
| Stamp duty (additional dwelling, non-resident) | 7% surcharge + standard rates | Combined surcharge on top of progressive SDLT bands |
| Solicitor and conveyancing fees | £1,500–£3,000 | Includes searches, land registry, and contract review |
| Specialist holiday let insurance | £800–£2,500/year | Covers public liability, guest damage, loss of income |
| Management fees (if outsourced) | 20–30% of gross revenue | Plus separate cleaning fees per booking |
| Maintenance budget | 1.5–2% of property value/year | £6,000–£8,000 on a £400,000 property |
| Council tax or business rates | Varies by location and letting pattern | 140+ days/year may shift property to business rates |
Regional revenue figures show why location matters so much. A two-bedroom coastal cottage in Cornwall can gross £25,000–55,000 a year, with peak weeks in July, August, Christmas, and Easter fetching £1,800–3,500 per week. A three-bedroom lakeside property in the Lake District can gross £30,000–65,000. But after management, maintenance, insurance, and tax, net yields typically land at 3–6% of the property’s value — comparable to a standard buy-to-let in many areas, despite the higher gross income.
Mortgage financing adds another layer. Non-UK residents typically need deposits of 25–35%. Lenders test affordability using 52-week occupancy projections, which can be conservative for a seasonal property that earns most of its revenue in a dozen peak weeks. That works in your favour for passing the mortgage stress test, but it shouldn’t be mistaken for a realistic income forecast.
Where buyers and owners get this wrong
Assuming the old tax rules still apply
The FHL regime ended on 6 April 2025. Holiday lets are now taxed as standard residential property businesses. Mortgage interest relief is restricted to a 20% basic-rate tax credit rather than a full deduction from profits. Capital allowances on furnishings are gone, replaced by the replacement of domestic items relief — you can only deduct the cost of replacing an existing item, not the initial purchase. For a leveraged investor, this change alone can push the effective tax rate up by several percentage points. If you’re basing your numbers on the old rules, they’re wrong.
Ignoring local licensing and planning restrictions
Short-term rental regulation varies by location and is tightening. England introduced mandatory registration for short-term lets in 2024. Scotland’s licensing scheme has been active since 2023. Some local authorities — particularly in the Lake District, Cornwall, and parts of London — have introduced Article 4 Directions that remove permitted development rights and require planning permission to change a property’s use to holiday letting. A property might also have restrictive covenants or Section 106 agreements that limit short-term letting. Your solicitor needs to check the title and local planning policies before exchange, not after.
Using standard home insurance
A standard home insurance policy does not cover paying guests. Holiday let insurance must cover public liability, guest damage, loss of income from cancellations, and periods when the property is vacant between bookings. Premiums typically run £800–2,500 a year depending on the property’s value and location. Coastal properties face higher weather-related risk, which can push premiums up further. Secure a draft insurance policy before you complete the purchase — don’t assume you’ll find affordable cover after the fact.
Underestimating the workload or the management cost
A holiday let is a hospitality business, not a passive investment. If you live more than an hour away, you’re looking at professional management at 20–30% of gross revenue. Even if you manage it yourself, you’re handling marketing, bookings, guest communication, cleaning, repairs, and compliance with gas safety, electrical safety, and fire risk assessment requirements. The Croft Cottage case study in the Peak District shows what’s possible — £70,000–75,000 annual revenue with 90–95% occupancy — but the owner runs 50–60 bookings and over 300 guests a year. That’s a full-time commitment.
How to approach a holiday home purchase in the current market
Choosing the right location
Location determines both income potential and regulatory risk. Cornwall and the Lake District offer the strongest rental markets but come with the highest entry prices — quality coastal property in Cornwall starts from £400,000 — and the most active local authority restrictions. The Cotswolds commands premium rates for larger properties, particularly from the corporate and wedding party market, but prices are among the highest in England. The Scottish Highlands and Wales offer lower purchase prices and growing tourism demand, but longer drive times from major cities limit some mid-market demand. Visit the area in both peak and off-peak seasons before committing. Talk to local letting agents about actual occupancy rates, not just weekly rates.
Financing the purchase
Specialist holiday let mortgages are available but the market has fewer lenders than standard buy-to-let, and some have tightened criteria following the FHL abolition. Deposits of 25–35% are typical. Rental coverage tests use 52-week occupancy projections, which tend to be more generous than realistic seasonal income — that helps you qualify but shouldn’t be your financial plan. Work with a mortgage broker who understands holiday lets and can explain which lenders still offer products and what their criteria are. If you’re a non-resident, expect higher rates and arrangement fees than a standard residential mortgage.
Management and operations
Decide early whether you’ll manage the property yourself or use a professional management company. Full management typically costs 20–30% of gross revenue plus cleaning fees. That’s a significant hit to income, but it removes the operational burden. If you self-manage, budget for your own time — marketing, guest communication, cleaning coordination, maintenance, and compliance documentation all take hours each week. Either way, you need specialist holiday let insurance, up-to-date Gas Safety and Electrical Installation Condition Reports, and a Fire Risk Assessment. These aren’t optional; they’re legal requirements.
Regulatory compliance — the emerging picture
The regulatory environment is still evolving. England’s mandatory short-term let registration system is being phased in. Some local authorities are consulting on further restrictions on the proportion of dwellings that can be used as holiday lets. Scotland’s licensing scheme already requires all hosts to hold a licence from their local authority, and Edinburgh has introduced additional restrictions. Before you buy, check the local authority’s current policy on short-term lets and any planned changes. A property that works as a holiday let today might face new restrictions tomorrow. Your solicitor should review the local plan and any Article 4 Directions affecting the area.
Frequently asked questions
Can I use a standard buy-to-let mortgage for a holiday home? ▾
What happens if I let the property for fewer than 140 days a year? ▾
Do I need planning permission to use a property as a holiday let? ▾
Is it better to own a holiday home personally or through a company? ▾
What insurance do I need for a holiday let? ▾
How does the 2025 FHL abolition affect my tax bill? ▾
The post-FHL landscape — what it means for your decision
The abolition of the Furnished Holiday Letting regime removed the tax advantages that made holiday lets structurally more attractive than standard buy-to-lets. What remains is a property that can generate higher gross income than a long-term rental, but with higher costs, more operational work, and greater income volatility. The locations that perform best — Cornwall, the Lake District, the Cotswolds — also face the tightest regulatory scrutiny and the highest entry prices. For someone who wants a personal getaway that also earns money, a holiday home can still work. But the numbers need to be run on the current tax rules, with realistic occupancy figures, and with a clear understanding of what managing a hospitality business actually involves.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Airbnb Apocalypse: Has Short-Term Letting Damaged the UK Housing Market?.
Sources and Further Reading
Renting vs Buying in the UK: The Ultimate Financial Face-Off — A broader look at the financial trade-offs between renting and owning property in the current market.
The Changing Face of UK Property: Adapting to New Demographics — How shifting population patterns and housing demand are reshaping the UK property landscape.
Global Investments (2025). Holiday Home Ownership UK. 🔗
Keystone Property Finders (2025). The Rising Demand for Holiday Homes in the UK. 🔗
Michelmores (2025). Implications of Buying a Holiday Home in the UK. 🔗
Great British Life (2025). Need to Know: Investing in UK Holiday Homes. 🔗
