Furnished holiday lets – what landlords need to know about renting out holiday properties

18.05.2023 9 min read

Holiday lets can be lucrative for landlords, bringing in higher rental yields and providing greater opportunities for tax savings. But there’s a lot to consider before taking the plunge – here’s all you need to know.

What’s a furnished holiday let?

A furnished holiday let (FHL) is a property that’s rented out on a short-term basis. This might be by holiday makers, business travellers, or anyone else in need of short-term accommodation. 

Holiday lets can mean seriously lucrative business for landlords – as long as they’re in an area where there’s demand. Think: popular beach destinations, nature spots, city centres, and areas that are close-by to music festivals and other major attractions. Impressive or quirky properties also have the potential to go down a storm too – as proven by Airbnb; specifically its ‘OMG’ category which boasts everything from windmills to forest-shrouded submarines. 

From eccentric homes to quintessential seaside cottages – one of the biggest differentiators between standard rental properties and holiday lets relates to tax. Mainly, holiday lets are much more advantageous in this respect – we cover this in detail below. But first:

Furnished holiday let criteria – what counts as a short term let?

As a landlord, it’s important to know that a property needs to meet a specific set of criteria for it to be classed as a holiday let. This is because, as we touched on above, furnished holiday lets are treated differently from a tax point of view (and they generally require specific mortgages and types of insurance, too). 

The UK government says that a property is classed as a furnished holiday let if: 

  • It’s in the UK or European Economic Area (EEA) – the EEA includes Iceland, Liechtenstein and Norway.
  • It’s available to let for at least 210 days a year.
  • It’s furnished – there needs to be enough furniture and self catering equipment to make the property livable in for visitors.
  • No single letting lasts longer than 31 days or, if it does, there are no more than a total of 155 days of longer lets in a year.
  • The property is let to members of the public for at least 105 days in a year – this does not include any times where you let friends or relatives stay at your property for free or at a reduced rate. 

If you own one or more holiday lets and for some reason don’t meet all the criteria one year, there are a couple of exemptions you might qualify for:

  • Averaging election: If you rent out multiple holiday homes, you can average out the numbers across properties – so, if one didn’t end up being let for 105 days, you might still be able to class it as a holiday let if the average across all your properties was over 105 days.
  • Period of grace election: In some cases, if you can prove that you were genuinely trying to meet the FHL criteria but still failed to rent out your property for the 105 days, you can get an exemption. For example, you might show that you marketed the property as much as or more than previous years, or that lettings were cancelled because of unforeseen circumstances like extreme weather. .

Holiday let legal considerations

If you’re thinking of buying a property to let as a holiday rental, or turning a property you already own into one – there are some important legal considerations to be aware of.

Planning permission

Your local authority might require you to get planning permission to change the use of a property. Each local authority has its own set of rules and regulations around this – so it’s crucial to check with them before taking any steps towards turning a property into a short-term let venture.For example, in London, homeowners are only allowed to rent out their property for a maximum of 90 nights in a year without planning permission. For anything over that – they need to get permission.


Most buy-to-let mortgages are only valid for Assured Shorthold Tenancy agreements (AST) – the standard rental agreement for long-term lets. And residential mortgages usually rule out short-term letting or, if they allow it, there’ll be strings attached.

With all this in mind, it’s highly likely you’ll need a specific holiday let or (also called short term let) mortgage for your FHL. Because holiday let mortgages are still quite niche, you might find you need to pay a higher deposit and higher interest rates to secure one. Still, this could end up being well worth it with the right FHL strategy.

Leasehold limitations

If the property you’re looking to let is leasehold, its terms and conditions might not allow holiday letting – so it’s important to check this out.

What are the benefits of running a furnished holiday let? 

Now we’ve covered the technical stuff, let’s take a look at some of the reasons why branching out into holiday lets might be the right move for you:

Higher rental income

Although there are a lot of variables, studies show that holiday let landlords could reap up to 30% more yield than standard buy-to-let landlords. And it’s not unrealistic to say that, in high demand areas, you could end up earning in a week from a holiday let what you’d get in a month from a standard let. Not bad.

Of course, it’s worth noting that you’ll have higher running costs and potentially more void periods. But even taking these factors into account, you could still end up earning a lot more from a holiday let if you get consistent bookings in peak seasons. 

Potential tax savings

The tax treatment of furnished holiday lets is not necessarily beneficial, compared to that of standard tenancies. However, the income from furnished holiday lets is treated as business income and therefore tax relief rules may be advantageous. This is because landlords can claim all of their mortgage interest payments as a business expense for holiday lets (remember, a rental property has to meet the specific criteria outlined above to be classed as a holiday let for tax purposes). This has the potential to reduce your tax bill significantly. Landlords of standard buy-to-let properties used to be able to do the same. But recent changes to these rules mean they can now only claim a 20 percent tax credit for mortgage interest payments. As always, we recommend seeking professional advice when dealing with tax.

Using your property yourself

One added bonus of renting out a property as a holiday home is that you’ve then got the option of using your property yourself if you want to. This is much less likely to be the case with long-term lets where you’re renting out to tenants for months and years at a time.

As long as you make sure your property is available to rent for 210 days a year, and rented out for 105 days of the year, you could happily use it for the remaining weeks as a holiday home – say, in off-peak season.

Short-term let disadvantages to be aware of

For all the appeal running a holiday let business has, there are some potential downsides to consider before making any big decisions:

More hands on and time-consuming

The nature of running lots of back-to-back short-term lets means there’s more work involved than with longer-term lets. You’re essentially running a sort-of hotel, where guests will require things like clean bedding and towels, an immaculate space, and potentially even breakfast provided. Of course, there’s always the possibility of hiring an agency to take care of the running of things for you, and you could recoup associated costs through charging a higher rate.

Demand can rise and fall

Factors outside your control – like the economic climate, weather, or a global pandemic – can affect your ability to rent out your property or properties.  

Higher running costs

You’ll be responsible for paying all the bills for the property, and there’ll be more wear and tear thanks to higher footfall. You’ll need to pay for cleaning between lets, and make sure your property is accessible to people with disabilities too. 

Are Airbnb lets the same as holiday lets?

A property is classed as a furnished holiday let if it meets the criteria we outlined above – regardless of how you rent it out. It doesn’t matter whether you use Airbnb or another means to let your property – if it meets the above criteria, the government, mortgage lenders and insurers will class it as a furnished holiday let.

Do you need specific insurance for furnished holiday lets?

Yes – it’s likely you’ll need insurance that’s specific to holiday letting for your property to be covered. Standard buildings and contents insurance won’t cover you, and it’s unlikely standard buy-to-let insurance will cover you either. It’s best to speak to an insurer about getting a tailored holiday let policy. 

Can a property be run both as a furnished holiday let and a standard let with an Assured Shorthold Tenancy agreement (AST)?

Yes, in fact many landlords tell us that they are now considering letting their properties both as FHL and with an AST, to maximise occupancy and to make the most revenue from seasonal trends. However, the different requirements of both FHL and AST have to be taken into account and the tax implications can get complicated. Once again, our recommendation is to consult an expert when dealing with tax and compliance issues.

Short-term lets – closing thoughts

Entering the world of holiday letting can reap serious rewards for you as a landlord – but it’s a pretty different business than running long-term lets so it’s not something to be entered into lightly. Still, the potential for higher profits could make the additional effort worth it. Perhaps what’s most important to consider are the location and the potential for seasonal demand of any holiday property – it’s crucial to research demand before investing to make sure your venture is viable.

Good to know – Hammock helps you keep track of the furnished holiday lets requirements

Hammock – the accounting software for landlords – has a dedicated set of solutions designed specifically for those running furnished holiday lets. Hammock helps you keep track of both days and revenue across each holiday let property. We are currently giving early access to the FHL solution to the users who would like to test it: get in touch if you are interested.