Are Holiday Lets Still a Haven for Investors?

As Spring finally looks like making an appearance, there’s no doubt many of us are starting to hanker for our holidays. And that’s why, now is a good time to start thinking about a particular property strategy that has blossomed in recent years.

Lockdown in particular saw a proliferation of holiday lets coming on to the market in the UK. Staycations became the name of the game, with many Brits rediscovering the love of their home country. And many property investors, burnt by the loss of landlord tax relief in the buy to let market, swapped their short-term lets for residents into holiday homes for fun and sun seekers. According to a recent BBC report, the number of holiday lets in the UK increased by 40 per cent over the three years to 2021. Despite such fierce competition, for the majority of investors their profits soared.

Recent tax relief changes for holiday lets

Recent legislation has meant that those profits won’t be quite as high, thanks to plans to abolish landlord tax relief for the specific niche furnished holiday lets next year. But, with the right strategy, holiday lets can still prove a good example of how to invest in property and turn a nice profit. It also doesn’t affect those that have invested the smart way and protected their holiday lets from this political change.

What qualifies as a holiday let?

First though, a holiday let is a furnished property that is let out for days, weeks and short stays in general. Until recently this was classed as a business rather than a property investment (hence the landlord tax relief and other benefits). This all stops on April 6, 2025.

Licensing scheme for holiday lets

In an effort to improve standards within the industry the government has now also introduced plans for a licensing scheme for holiday lets in England and Wales. Such a scheme for investment property already exists in Scotland and Northern Ireland.

Why holiday lets are still profitable

But despite the regulation crackdown, holiday lets are still a good way to invest in property. That’s because it’s not just holiday makers who stay in this type of short-term accommodation. Local contractors working in the area and home buyers needing to rent before a sale goes through often stay here too.

Pros and cons of holiday short term lets

Pros: 

• You can holiday in the property yourself for a time
• It’s possible to get a holiday let mortgage 
• The cost of living crisis means many Brits are still holidaying at home

Cons:

• There’s a lot of upkeep and maintenance. You’ll have to clean after each guest and spend a lot of time on administration.  Using agencies like Staycays UK Ltd can help. 
• Winter void periods can see profits fall

Holiday lets: where to buy investment property

Popular holiday locations, such as seaside resorts, city centre flats and countryside retreats in the likes of the Peak District, areas of Yorkshire and rural Scotland all make good short-term holiday rental locations. This means, of course, that the investment properties will be more expensive but at least they should appeal to tenants. Note though, that some mortgage companies are limiting areas they’ll lend for, such as the Lake District, which has suffered flooding in recent years. As always, it’s best to thoroughly research your chosen location. 

Finally, for current holiday let owners put off by the recent tax changes coming into force next year, there is one bright glimmer on the horizon. As well as scrapping tax relief, Chancellor Jeremy Hunt reduced the Capital Gains Tax for higher tax payers, meaning you’ll pay less if you want to sell and move on. With an election on the horizon however this could change again.  Property and the housing market will always be a political football with each party looking for votes in the different demographics. There does however still remain a shortage of housing and a demand for both residential and commercial still remains. Taking qualified tax advice and following investment advice from investors who have been there and done it could protect you from the external pressures.

Get in touch

Wondering if your holiday let is still a viable property investment? Or are you thinking of switching to another more profitable strategy? Perhaps you simply want to know how to get into property investment in the first place? 

Then why not get in touch with the team here at Saltbox Property Group    for advice? 

Write to nick@saltboxliving.co.uk or ring us on 07720 54630