Renting out your home as a holiday let

Renting out your home as a holiday let on sites like Airbnb can be a great way of making extra money, but there are local restrictions, taxes, hosting fees and safety guidelines to bear in mind to help you decide if it is right for you.

Angela Kerr Director, Editor

Renting out your holiday home as a holiday let with Airbnb or other holiday lettings websites can be a great way to help you cover your mortgage and even to pay it off sooner, but it is not for everyone and it’s important to look into local rules, restrictions and the costs involved.

You might be considering letting your whole home when you go away on holiday yourself in order to cover your travel costs or maybe just letting out a spare room in your property while you are living there.

When platforms like Airbnb work at their best, you can end up making new friends from around the world as well as making money. However, there are inevitably horror stories of guests who have caused thousands of pounds in damage.

You’ll also need to check that your local council, mortgage lender and home insurance will allow you to offer holiday rentals and make sure that you understand the impact it will have on your tax bill. If you live in a flat, you will need to check the terms of your lease to ensure short term rentals is not prohibited.

How much could I earn with a holiday let?

One of the big attractions of buying a holiday home in the UK is the potential income. Holiday lets can generate far higher weekly rents than traditional buy-to-lets, especially in peak season. But costs eat into that. Cleaning, agency fees, maintenance and empty weeks all reduce your return.

According to Sykes’ 2024 Holiday Letting Outlook Report, the average annual income for a holiday let is £24,500. Top-performing properties in areas like Cumbria, Cornwall and North Yorkshire earn considerably more.

With holiday rentals, you decide the nightly rate your guests will pay. Your rates can be modified at any time and can vary from night to night, season to season. For example, some hosts charge a higher nightly rate on weekends and a lower one during the week, when fewer guests are traveling and more places may be available.

• Airbnb says its typical UK host earns £4,000 a year by hosting for an average of 30 nights a year.
• Rates vary hugely depending on location, your property and seasonal demand from tourists. 

Be aware that some cities require you to collect local tax or Value Added Tax (VAT) from your guests.

For further advice on what taxes to be aware of with a holiday let including how rental income is treated and what expenditures are tax deductible, it can be a good idea to get independent tax advice. Our partners at Unbiased can match you with the right tax adviser.

Planning issues with a holiday let

Check local rules carefully as some authorities require planning permission for a “material change of use” if you plan to offer temporary sleeping accommodation in a residential property.

In London, the government recently introduced an exception in order to allow short lets without planning permission so long as the cumulative number of nights does not exceed 90 in a calendar year and so long as the property owner pays council tax.

However, even in London, local planning authorities have retained the right to exclude certain properties or certain areas from this exception, so you should still check with your council.

Mortgage trouble with a holiday let

Not all mortgage lenders will allow you to carry out short-term lets, although hopefully the situation will improve over time. For more advice on holiday let mortgages, see our guide.

Speak to a mortgage broker for an up-to-the-minute advice on which lenders are most accommodating to short-term lets as policies are constantly being tweaked.  

You can get free impartial advice from our partners at award-winning brokers L&C

Listing my home and vetting guests

When listing your property, make sure you specify which rooms guests have access to and which are off-limits.

Good photographs are vital. It can even be worth investing in professional shots to show your home off at its best.

Make sure you correspond with potential guests in advance and read their ratings from other hosts to ensure that you know what type of holiday they are planning. There is a big difference between a couple on a relaxing getaway and a group of friends on a stag or hen party.

Look at other comparable property listing to determine pricing. Consider adding a cleaning fee.

Preparing my home

Invest in a safe or somewhere where you can lock away your most valuable items. We know of people boarding up part of their loft with items they don’t want touched hidden away within, and who have lockable cupboards in the kitchen.

The host is expected to provide bed linen, towels, cooking equipment and also cover utilities bills and offer wifi access as part of the nightly rate

There may be recommended cleaning practices for hosts to follow as well.

Insurance

Airbnb offers its own guarantee that protects hosts for damages that occur during “eligible” bookings up to $1m or local equivalent (currently around £800,000). BUT, make sure you read the exclusions carefully. Airbnb states “this does not take the place of homeowners or renters insurance or of adequate liability coverage.”

In order to be fully protected you may need to take out a specialist holiday home insurance policy, as ordinary landlords insurance excludes short lets.

Compare holiday home insurance quotes now.

Listing costs

Listing costs vary by provider as follows:

• Airbnb charges hosts 3% of the final sum paid by guests as a service fee for using the platform. Guests also pay a fee of up to 14.2%.
• Tripadvisor charges owners a processing fee of 3% per booking. Guests are also charged a booking fee which is a percentage of the total rental cost. The fee is variable and ranges from 8% to 16% for the majority of bookings.  Trip Advisor has a number of partner brands such as holidaylettings.co.uk.
• Booking.com commission varies by region but is on average 15%. 
• Sykescottages.co.uk keeps 20% which guests pay as a deposit.

Tax

You’ll also need to consider any tax you need to pay on your rental income. How this works depends on how you rent out your home and how much income you earn.

• For example, if you’re simply renting out a room in your main home you should be able to benefit from the government’s rent-a-room scheme which allows you to earn up to £7,500 per year tax free. The threshold is halved if you share the income with your partner or someone else.
• Whereas if you’re renting out your whole house, you can earn £1,000 per year from small scale property-letting activities tax-free. Although you can’t claim both allowances on the same let.

But whenever it comes to tax matters, we recommend speaking to a qualified tax advisor to get advice tailored to your circumstance. Find a qualified tax adviser with our partners at Unbiased:

Being a good host

While there are no official codes of conduct for homeowners looking to rent out their home as a holiday let, sites like Airbnb do expect hosts to ‘think carefully about their responsibilites’ and guidance is given on everything from providing a clean and Covid-19 safe space to responding to guests in a timely manner. The site does state however that it has “no control over the conduct of hosts and disclaims all liability.” That being said of course if you’re a poor host it’s going to come out in your reviews and in really extreme cases Airbnb will ban you from listing a property.