Buying a Holiday Home UK

Buying a holiday home in the UK is a popular way to invest while giving you an asset you can enjoy. But there are pros and cons, laws and taxes, responsibilities and hidden costs as well as the best yields to consider. Our personal finance expert Ruth Jackson-Kirby explains all and shares her first hand experience of buying a holiday home.

Ruth Jackson-Kirby Personal Finance & Property Journalist

Buying a Holiday Home UK

You might be looking for a second home by the sea, or the best holiday let investment in a busy tourist spot. Either way, buying a holiday home is a big financial commitment. I know, I’ve done it myself. In 2019, I bought a holiday home in Keswick to use as both a family escape and a holiday let. Two years later, we sold it. Here’s what I learnt – and what you can learn from my mistakes.

KEY INFORMATION

Pros and Cons of Buying a Holiday Home UK

Pros:

• A familiar home away from home, somewhere you love, that the whole family can use
• A holiday without the hassle and expense of foreign travel
• Potential rental income over the property’s lifetime
• A capital asset that should grow in value

Cons

• High purchase price
• Requires a large deposit of at least 25%
• Taxes e.g. stamp duty surcharge, higher rate council tax
• Ongoing costs e.g. property maintenance, utilities, insurance and management agencies. Average £7,500+ a year.
• Responsibilities e.g. security and maintenance. If you’re letting out, complying with health and safety, fire safety and other regulations apply.
• Dealing with guests e.g. being on call in or dealing with emergencies (broken boiler, problems with keys etc)

Why do you want to buy a holiday home in the UK?

Before you start your property hunt, be clear about why you want to buy a holiday home.

I started out looking for a holiday home for us to use as a family. Then during the search we decided we would also let it out. That meant we bought a four-bedroom townhouse that stretched our budget, prioritising what would appeal to guests rather than what we needed – like a garden for the dogs. It worked well for our guests, but not so well for us.

If you are buying a holiday home in the UK purely for your own use, will you be happy holidaying in the same place for years? And who will look after the property when you aren’t there?

A holiday let property investment comes with a few more questions as you’ll want to make sure the numbers stack up. Can you can afford to buy, maintain and keep the property? Will it cover its costs and make you a return on investment? Read on for more on the costs involved.

For advice on investing in property including the taxes involved, find a financial adviser.

Where to buy a holiday home in the UK

If you’re buying a holiday home just for yourself, go where you love – but think long-term. Will you still want to visit in ten years? Are there better-value alternatives nearby? For example, according to the Office for National Statistics, a home in Cornwall averages £290,000 compared to £199,00 in Gwynedd, which has equally beautiful beaches.

For holiday lets, focus on potential for earnings, usually driven by areas with highest demand. Does the area have year-round appeal? Good transport links? Is there parking? How much competition will you face?

We chose a townhouse in central Keswick – great for guests, close to restaurants and shops – but it had no garden. Not ideal for our dogs, or my husband, who got stuck with the early morning walks.

Also, check local restrictions. Some councils are tightening rules on second homes and holiday lets. You may need planning permission or face higher council tax bills.

“We overstretched ourselves. If I had my time again, I’d buy something smaller.”

How much income can you get from 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.

Our Keswick property had strong summer bookings, and in school holidays, but it dipped in the colder months. Even in the busy months your profits are impacted by the increased cleaning and maintenance costs. And guests – even the great ones – add wear and tear. We knew we’d eventually need to replace sofas, mattresses and kitchen units, and we weren’t earning enough to cover the running costs and build a reserve fund.

In the end, the numbers didn’t stack up the way we hoped. Covid hit us hard and managing the property from afar was stressful. Ultimately though the biggest problem was we overstretched ourselves. If I had my time again, I’d buy something smaller, with lower running costs.

Best places to buy a second home in the UK – ranked by earnings

If you’re looking to generate some income from your second home, then Sykes Holiday Cottages suggests year-round destinations in the Lake District and the Cotswolds generate the most income overall.

Hidden costs & taxes when buying a UK holiday home

The average annual cost of running a holiday let reported by users of Sykes Holiday Cottages, including maintenance, marketing, bills, taxes etc. was £7,500.

When buying a holiday home in the UK you also need to factor several extra costs into your budget. Stamp duty and council tax alone can significantly increase your costs.

For further advice on what taxes to be aware of when buying a holiday home including how holiday let income is treated, what expenditures are tax deductible, as well as, capital gains tax on second homes, It can be a good idea to get independent tax advice. Our partners at Unbiased can match you with the right tax adviser.

Holiday homes and stamp duty

Stamp duty is the big expense when buying a holiday home. Second homes – whether you plan to use them yourself or rent them out – attract an extra tax when you buy them. Known as the additional stamp duty rate it is payable on any property you buy worth more than £40,000 if it means you will end up owning more than one house. You can find out more in our guide to stamp duty for second homes.

In England and Northern Ireland second home stamp duty is 5% on top of the standard rate. So, you could pay anything between 5% and 17% tax on your purchase price depending on the value of the property. The rates are different in Scotland and Wales.

Use our stamp duty calculator below to work out what you will pay.

Second Home Stamp Duty Calculator

Council tax on second homes

Another cost with buying a holiday home is the council tax you will pay. Since 2023 councils in England have the right to charge an additional council tax levy of up to 100% on second homes. That means you could have to pay thousands of pounds to the local council for your holiday home each year. For example, a band H second home in Corfe Castle, Dorset would have a £10,333 annual council tax bill – over £5,000 more than locals pay.

In Scotland councils can charge up to double the tax on second homes and in Wales the extra charge can be up to 300% of the main council tax levy.

You can find out more with our complete guide to council tax on second homes.

However, if you are using your second home as a holiday let you may not pay any council tax at all. If you are advertising your home as available for holiday lets for at least 140 nights a year – and actually letting it for at least 70 – you qualify for business rates instead of council tax. And, in England, if your rateable value is under £12,000 then small business rates relief kick in and you don’t pay any rates at all.

As council tax bills soar, it’s worth considering letting out your holiday home to save you a significant amount of money.

Other costs to consider

• Furnishings: Unless you are buying an existing holiday let, you’ll need to budget for filling your new home with furniture and fittings.
• Maintenance: Factor in regular costs like cleaning, gardening and repairs. Reliable local help isn’t always easy to find.
• Marketing – if you are planning to let out your holiday home, think about how you’ll reach guests – whether through a letting agent or DIY platforms like Airbnb. They will all charge a commission.

When we bought our property, we assumed the letting agency would handle everything. At the last minute, they told us they didn’t cover cleaning or maintenance in our area. We were lucky to find a brilliant local cleaner — but when she retired, we struggled to replace her. That was one of the reasons we decided to sell.

How do I find a holiday home for sale?

Start in the usual way you buy a home, with the property portals like Rightmove and Zoopla to search for properties for sale in the areas you want to buy. Consider visiting popular holiday destinations you are interested in buying in and speak to local estate agents. It’s a good opportunity to research the local area and get some insights from local property experts. Sites like Darwin Escapes, Sykes Cottages and other sites that specialise in holiday homes and lodges usually have a for sale section of their site.

Buying a second home can be brilliant – but it’s also a second job.

Reality of buying a holiday home

Set aside the dream of waking up to a cup of tea and a fabulous view and make sure you consider the reality of owning a holiday home.

Holiday homes come with their own jobs, responsibilities and potential downsides. Make sure you take these into account:

• Management – Letting agents charge around 15% – 25% of your income to handle bookings, marketing and guest contact. Alternatively, you can take on those responsibilities yourself to keep more of the money, but that’s probably only an option if you live nearby and have time to spare.
• Cleaning – You can don the marigolds yourself or you’ll need a reliable local cleaner.
• Emergencies and repairs – it’s hard enough keeping on top of the maintenance of your own home, a second home adds a whole other pile of responsibilities and possible disasters. A local handyman you can trust will be invaluable. This can be especially stressful if you don’t live within easy reach of your holiday home.
• Safety –You’ll need to have smoke alarms, CO detectors, annual gas checks plus regular electrical inspections.
• Insurance – You’ll need specialist holiday home insurance or policies that allow for the property to be empty for long periods.
• Security – With your property likely to be empty fairly regularly make sure you take steps to protect it. This could mean timer lights, motion activated lighting, a burglar alarm and possibly CCTV.
• Running costs – A second home means a second set of bills. You will be responsible for utility bills, council tax, home insurance, mortgage repayments, cleaning, gardening etc.
• Costs during low seasons – Some areas of the UK offer year-round tourism, but there are always going to be periods where your holiday let is unoccupied. Make sure you budget for covering your running costs when you don’t have guests.
• Guests – You are relying on strangers to treat your property well. Many of them will but, inevitably, some won’t. Not only is there the financial cost of clearing up after them, it can also be heartbreaking to see the damage they’ve done to your beloved holiday home.

For us, one of the unexpected downsides was that staying at the property stopped feeling like a holiday and more like work. We’d worry about damage, spend time fixing things and replacing lost and broken items. But for many people managing a property and keeping it in tip-top condition is part of the satisfaction. It you’re organised and realistic, it can work brilliantly.

If you’re clear on what you want, have realistic financial expectations, and can stomach the work, it can be a great way to enjoy your favourite place and earn a bit on the side.

Just don’t mistake it for easy money. It’s a second home — and a second job.

Frequently Asked Questions