Will holiday lets be taxed to death?
That was the question on the front of the Sunday Times property pages last month. If you own a short let, it’s not really what you want to read over your morning cuppa.
The article paints a picture of an industry under pressure: more than 20 new taxes or regulations in four years, according to the Professional Association of Self-Caterers (PASC UK). Owners in Cornwall and Devon say they can’t raise prices any further or they’ll price themselves out of the market, and estate agents’ windows are full of former holiday cottages, “spotless, uncluttered kitchens and folded towels on the bed”.
It’s a real story. But it isn’t the whole story, and it certainly isn’t the story for every owner.
So let’s take a closer look: What’s actually being proposed? What has already changed? And what does it mean if your property is in Cambridge or Bedfordshire, rather than a fishing village?
What’s actually on the short let, holiday home tax table?
Right now, it’s a review, not a rule.
Treasury minister James Murray confirmed in a written parliamentary answer that the government is reconsidering “the tax treatment of short-term lets, such as self-catering accommodation”. The concern is that some second-home owners are still listing properties as holiday lets mainly to avoid council tax. So far, no further details have been released.
The rumour is that some or all self-catering properties could be moved from business rates to council tax. At the moment, a holiday let with a rateable value of £12,000 or less pays no business rates at all. Between £12,001 and £15,000, there’s a sliding discount.
If that relief went, PASC UK estimates the average holiday let owner would pay an extra £1,000 to £3,000 a year. Now that’s going to be impacted because, according to their figures, most owners make around £5,000 a year in profit.
The Treasury’s position is that it announces tax decisions at fiscal events, not through speculation. The next one is the Budget on 28 October.
What has already changed for short let owners and landlords?
Whatever happens next week, the ground has already shifted. Here are the changes most relevant to owners in England:
When | What changed | What it means for owners |
September 2026 | Overnight Visitor Levy Bill announced | A possible tourist tax of up to 5% on overnight stays, from early 2028 if passed |
April 2025 | Furnished holiday lettings (FHL) regime abolished | Short-let profits are now taxed like long-term rentals. Mortgage interest relief is capped at 20%, the same as buy-to-let |
January 2024 | Booking platforms report host income to HMRC | Airbnb, Booking.com and others now share annual rental income with the taxman |
April 2023 | Tighter business rates rules | To qualify for business rates, a property must be available for at least 140 nights a year and actually let for at least 70 |
That last rule has already done a lot of sorting.
Between 2023 and 2025, 34,170 self-catering homes were moved off the business rates list and back onto council tax because they weren’t let often enough.
In other words, the government has already started separating genuine short-let businesses from second homes with an occasional guest. The review now underway is the next step in that same process.
Why Cambridge and Bedford short-lets are a different story
Most of the Sunday Times article is about holiday cottages in Cornwall and Devon. Those homes rely on summer holidaymakers, in places where property values are flat or falling.
Cities work differently.
In Cambridge, a large share of guests aren’t on holiday at all. They’re here for the Science Park, the Biomedical Campus, Addenbrooke’s, CB1 and the University, on projects, placements and contracts. They come in February as well as August. Bedford’s demand is growing too, with Universal’s planned UK resort on the horizon.
The article makes the same point about cities.
Merilee Karr, founder of UnderTheDoormat Group, says that in cities the Treasury’s gain from the proposed changes “might be very minimal at best”. In London, the article notes, a switch to council tax could even reduce costs for some bigger operators.
That doesn’t mean city owners are untouched. Every change to tax and running costs comes off your net income. But it does mean a Cambridge property shouldn’t be judged by a Cornish cottage’s numbers.
From lifestyle investment to yield discipline
The most useful line in the whole article comes from Canan Wood at Hamptons:
“It’s a shift from lifestyle investment to yield discipline.”
For years, plenty of holiday lets ran on goodwill and gut feel. They were family homes let out between visits. They set prices once a year and never added up the costs. The Harveys, who are interviewed in the article, are honest about it: if they charged for their own time running the house, it would make “a considerable loss”.
That model is under real pressure.
A professionally run short let is in a different position, because it has always had to answer one question: what does this home actually earn once everything comes off?
Not the gross figure on a booking platform. The net figure, after cleaning, laundry, maintenance, platform fees, management, tax and everything else. If a tax change adds £2,000 a year, you want to know exactly where that lands, not find out at year end.
The article also points to where demand is heading. Hamptons is seeing owners move towards corporate guests, who tend to stay two to three months, are paid for by a company, and turn over less often than holiday guests. For a well-located Cambridge home, that’s not a new market. It’s the market that’s been there all along.
As ever, the right structure for your property is a conversation for your accountant. Our job is to make sure you’re making it with real numbers. We often ask potential clients if they have an accountant and whether they have had the conversation about whether short-term letting is the right move, right now.
So, what should you do now, before the Budget?
You don’t need to make any big decisions before the Budget, but you do need to be ready for whatever comes out of it.
- Don’t act on a headline. Rumours aren’t policy. Wait for the detail, and any transition period, before you sell, switch or restructure. We’ll update you as soon as the details are released.
- Know your net, not your gross. Work out what your property earned last year after every cost. That’s the number any tax change will hit.
- Check your letting days. If you’re on business rates, make sure you can show at least 140 nights available and 70 nights let. Keep good records and review them regularly.
- Look at who books your home. Business guests, longer stays, and relocations behave differently from weekend holidaymakers. Is your pricing and set-up working for all of them?
- Speak to your accountant. Especially if you bought recently or are thinking about holding property in a company.
- Ask your property management the hard questions. What happens to your numbers if costs rise by £2,000 a year? A good manager should be able to answer that honestly and promptly.
The honest bottom line
Will holiday lets be taxed to death? For some owners, the numbers may well stop adding up, especially those running homes for love rather than income.
But a well-located, well-run short let, priced for the guests who actually come and measured on net income rather than headline figures, is a business. The government itself has acknowledged that many self-catering properties are genuine small businesses.
We’ll share what the Budget means for owners as soon as the detail is out. In the meantime, if you’d like an honest look at what your property really earns, we’re always happy to talk it through.
Sources
- Melissa York, “Will Labour tax holiday lets to death?”, The Sunday Times, 26 September 2026
- Treasury review of short-term let taxation (TS2)
- Labour considers tax changes targeting holiday let landlords (The Landlord Association)