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Owning a holiday let is becoming an increasingly popular investment opportunity in the UK. Not only does it offer you the potential to earn a second income, but you’ll also have your own holiday home to visit.

If you’re considering entering into the holiday letting business, here we take a look at what you need to know – from what holiday letting is and what the difference is between a holiday let and a long-term let, to whether a holiday let is a good investment.

What is a holiday let?

A holiday let is a property that is let out to holidaymakers for short durations. To comply with the furnished holiday letting tax rules, this should be for no more than 31 days. At Sykes Holiday Cottages, the maximum we would let a property out for is 28 nights.

Your holiday let must be furnished, and this will usually be to a high standard to match the expectations of holidaymakers, this could include luxuries such as hot tubs and open fires to increase your earning potential.

What is the legal definition of a holiday let?

HM Revenue & Customs (HMRC) says that to qualify as a furnished holiday let (FHL), and are therefore eligible for special tax rules, your property must be available to let for at least 210 days in a year, not including the days you’re staying there.

Your holiday property must be let commercially to the public as furnished holiday accommodation for at least 105 days in the year, excluding the days that your property is let out to family and friends at zero or reduced rates.

Our 2021 furnished holiday let tax guide provides more information for you to read through.

The difference between holiday lets and long-term lets

While a holiday let is aimed at holidaymakers taking a short break, long-term lets are aimed at people looking for somewhere to live instead of buying a property. Holiday lets can often be let for up to 31 days at a time, while long-term lets typically have contracts for 6-12 months at a time.

Read our guide on the differences between short-term and long-term letting.

What are the advantages of a holiday let?

Some of the advantages of holiday letting over long-term letting include:

The potential to generate a higher income

Long-term lets usually have a fixed monthly price agreed for a set amount of time in a contract. With holiday lets, however, you can be more flexible, adapting prices according to demand. This means you could charge more in the summer months, as an example, resulting in a higher overall income. In some cases, you can charge the same for a week in a holiday let as you would for a month in a long-term let

You have more visibility of your property

As your property will be let out for much shorter periods, you or your holiday let management company will be able to complete more regular checks on the property ensuring that it is maintained to a higher standard.

Damage and mistreatment is also extremely rare in holiday lets, as your property is respected as being somebody else’s home. Whereas with a long-term let, it is possible that less care can be taken as it’s closer to being their own home. This could protect your investment in the long term.

Your property will be regularly cleaned

Similarly, with a long-term let, you’re relying on the cleaning standards of your tenants. Whereas with a holiday let, you’ll know that your property is being cleaned regularly between changeovers, either by you or the agency managing your holiday let.

What are the disadvantages of a holiday let?

There are some disadvantages to consider too when comparing holiday lets to long-term lets. These include:

Your income is not guaranteed

While holiday lets allow you to be flexible with prices, you are not guaranteed to generate a set amount of income every month, as you are with a tenant in a long-term let. Depending on the location of your holiday let, your income may be more seasonal and determined by other factors.

More time and effort required

With long-term lets, you’re not required to do as many checks, and won’t have to deal with weekly changeovers or cleaning. However, if you don’t have enough time to run your holiday let, you can use a holiday let management company, such as ourselves, to take some of that hassle away.

Sykes offers a bespoke Managed Services package for our holiday let owners, where you can pick and choose the areas that you need help with.

Additional costs

Owning a long-term let allows you to pass the cost of utility bills and council tax onto your tenants. However with holiday letting, these costs are your responsibility. To find more out about the costs of running a holiday let, read our handy guide.

Are holiday lets a good investment?

Following a year of international travel restrictions due to the Coronavirus pandemic, the staycation market is booming as more Brits are holidaying in the UK. The trend of holidaying in the UK was already steadily growing however, at Sykes, we saw our bookings soar by 36% from 2017 to 2018. Judging by this, now could be a great time to invest in a holiday let.

How much can you earn from a holiday let?

The average Sykes property generates around £20,000 per year, however this can be as high as £125,000 per year. How much you earn from your holiday let is influenced by many factors, including:

  • Location
  • Features
  • Type of guests
  • Number of bedrooms
  • Pricing strategy

Sykes can help you to maximise your holiday let income, by offering advice and by giving you access to our market-leading pricing strategy. Discover our top tips on increasing your holiday let income.

Another reason why people choose to invest in a holiday let over a long-term let is the various tax benefits that come with it. Read our guide on financial support for holiday let owners for more information.

Find out more reasons as to why holiday lets are a good investment to help you make your decision.

Let your property with Sykes and earn up to £125,000 per year*

  • Join over 15,000 holiday properties already working with Sykes Cottages
  • We welcome over 26 million web visitors a year
  • Many of our owners achieve more than 45 bookings a year
  • We specialise in turning your holiday property into a profitable year-round income for you

*Based on a 7 bedroom property in the Lake District with bookings between October 2017 to September 2018.

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