Two Very Different Businesses

On paper, both a holiday let and a long-term let do the same thing: you own a property, somebody else pays to stay there, and you keep whatever is left after the costs. In practice they are entirely different businesses. A long-term let is a steady, relatively low-involvement income stream — closer in feel to holding a bond than running a shop. A holiday let is a hospitality operation. You are selling nights, and your income depends on how well those nights are priced, marketed and reviewed.

So the real question is not simply which one pays more. It is which one suits the time, temperament and capital you actually have. Both can work beautifully; both can disappoint badly when chosen for the wrong reasons.

Income Potential: Gross Figures Can Mislead

Short-term lets usually produce a higher gross income than an assured shorthold tenancy on the same property. A two-bedroom flat achieving £1,100 a month on a twelve-month tenancy brings in around £13,200 a year, allowing for the odd void. The same flat let for 170 nights at £95 a night would gross just over £16,000 — but only if those nights are genuinely booked, and the gap narrows quickly once realistic costs are included.

• Running costs: utilities, broadband, council tax or business rates, professional cleaning, linen, toiletries and welcome supplies all fall to you rather than the tenant.
• Platform commission: booking channels commonly take 15–20% of the nightly rate, and card fees and damage-claim costs sit on top.
• Wear and tear: far more people pass through the door, so furniture, flooring and appliances are replaced more often.
• Seasonality and voids: coastal and rural properties can trade hard in summer and barely at all in January, so annualise your projections rather than extrapolating from peak weeks.

Long-term lets have their own drags — arrears, repairs, the risk of a difficult tenancy — but the numbers are far more predictable, which matters enormously if you are relying on the income to service a mortgage.

The Reality of Management

A long-term tenancy might involve a handful of conversations a year. A holiday let is a weekly routine: guest messages, changeovers, restocking, cleaning checks, dealing with a boiler that fails on a Saturday evening in August. Realistically, allow several hours per booking if you self-manage, and be honest about whether that fits around your day job.

You can hand the whole thing to a managing agent, but their fee — often 15–25% of revenue plus cleaning — is usually the difference between an attractive return and an ordinary one. With a long-term let, the equivalent decision is simpler: a letting agent typically charges 8–12% to find and manage a tenancy, and much of the legal heavy lifting around deposits and prescribed information is well established.

Local Demand, Rules and Regulation

Before you buy, check what the local market actually supports and what the rules allow. A holiday let only works where people want to stay: proximity to coast, countryside, events or a strong business-travel market. A long-term let works wherever people need to live, which is a far broader base.

• Planning: short-term letting rules differ across the UK and are tightening. Some areas require planning permission or sit within Article 4 directions; central London has long-standing night limits. Confirm the position with the local authority before you exchange contracts.
• Licensing: Scotland, Wales and various English councils operate their own registration or licensing schemes, each with fees and safety obligations.
• Mortgages and insurance: holiday let lending is a smaller market with higher rates and stricter criteria. Standard buy-to-let mortgages generally prohibit short-term letting, and insurers expect to be told exactly how the property is used.
• Leases and energy standards: leasehold covenants may ban short lets outright, and rented homes must currently meet minimum energy performance ratings, with tougher standards proposed.

Tax and Financial Treatment

This is where the two routes diverged sharply. The furnished holiday lettings tax regime has been withdrawn, so from April 2025 holiday let profits are taxed as ordinary property income. Reliefs that once made short lets attractive — capital allowances on furniture, certain capital gains advantages and pension-relevant earnings treatment — are no longer available in the way they were, so anyone relying on an old spreadsheet should revisit it.

Both routes now sit closer together on income tax, but important differences remain. Furnished holiday lets may be assessed for business rates rather than council tax, and small business rate relief can be valuable in some areas. Long-term landlords can claim a tax credit at basic rate for mortgage interest, while holiday lets have historically been treated differently on finance costs. Higher rates of stamp duty apply to additional dwellings in either case. Inheritance tax, capital gains tax on eventual sale, and how profits interact with your other income all deserve a proper conversation with an accountant before you commit.

Which Route Fits You?

Ask yourself a few blunt questions. Can you absorb several weeks of no income in the low season? Do you want a second job, or a passive holding? Is the property in a genuine visitor destination, or simply somewhere you like? Would you be comfortable with strangers in your home every weekend?

If you want hands-off, predictable income and the property sits in a solid residential area, a long-term tenancy is usually the calmer choice. If you enjoy the hospitality side, have the time and the local demand is proven, a holiday let can outperform — but treat it as a business, with business-grade numbers, and take professional advice on the tax position before you buy rather than afterwards.