Short-term and holiday lets: How the rules differ from a standard tenancy
The appeal of short-term letting is easy to understand. Higher nightly rates, flexibility to use the property yourself, and the absence of the long-term obligations that come with a standard tenancy. But short-term letting sits in a very different legal, planning, and tax environment from residential letting, and landlords who move between the two without understanding the distinctions are the ones who run into serious problems. The tax rules changed in April 2025 when the Furnished Holiday Lettings regime was abolished, and the planning framework is continuing to develop. Here is where things stand.
The fundamental legal difference
When someone takes an assured periodic tenancy of your property, they become a tenant with the full set of rights that the Renters’ Rights Act 2025 confers. They have security of tenure. They can only be asked to leave on specific legal grounds, through the courts. Their rent can only be increased once a year through the correct process. None of that applies to a short-term guest.
A short-term occupant stays under a licence, not a tenancy. They are more akin to a hotel guest than a tenant. They do not have security of tenure and you can bring the arrangement to an end with relatively little process, provided the agreement is structured correctly. This flexibility is, of course, the point. But it depends entirely on the arrangement genuinely being a short-term licence rather than something that inadvertently creates a tenancy.
The practical risk for landlords who do a lot of short-term letting is the accidental tenancy. If the same person stays repeatedly, or for extended continuous periods, or if the arrangement starts to resemble a residential tenancy in substance, a court may decide that a tenancy has been created regardless of what the agreement calls it. At that point, the full Renters’ Rights Act framework applies, whether you intended it to or not.
Planning rules: London and everywhere else
Planning is the area where short-term letting diverges most sharply depending on where your property is.
In Greater London, the Deregulation Act 2015 limits the letting of entire residential properties as short-term accommodation to 90 nights per calendar year, measured from January to December, without planning permission for change of use. That limit applies per property, across all platforms combined.
Outside London, there is no equivalent statutory night cap. The question instead is whether the intensity of short-term letting amounts to a material change of use from residential use. Some councils already restrict short lets locally through their planning policies. A new planning class specifically for short-term lets has been proposed by the government but is not in force yet, so the position varies by area and it is worth checking with the local planning authority before starting a short-let operation. Before committing to short-term letting in any location outside London, confirm what restrictions, if any, currently apply where your property sits.
A national registration scheme is coming
The government has signalled a mandatory national registration scheme for short-term lets, which would give each property a unique registration number to display on all listings and give councils substantially better visibility of the market. The scheme was due to launch in 2026 but its start date has slipped more than once. It is planned, not yet running. Keep an eye on gov.uk for an updated launch date.
Tax: The abolition of Furnished Holiday Lettings
Until April 2025, landlords who met the Furnished Holiday Lettings criteria benefited from a more favourable tax regime that included capital allowances, capital gains tax reliefs, and the ability to treat rental profits as earned income for pension purposes. That regime was abolished from 6 April 2025.
Short-term letting income is now taxed as standard property income in the same way as a conventional residential letting. For landlords who moved into short-term letting specifically because of the tax advantages, this changes the financial case materially.
The Rent a Room scheme, which allows up to £7,500 of income tax-free when you let a room in your own home while living there, continues to apply where you are genuinely resident in the property.
Running costs: rates and council tax
A short-let property may be liable for business rates or council tax depending on how often it is available and actually let in a year. The thresholds for switching between the two differ in England, and it is worth confirming which applies to your specific situation with the local authority. Separately, many councils now charge a council tax premium on second homes and holiday let properties, adding to the annual running costs of operating a short-let. Factor both into your financial projections.
Mortgage, insurance, and safety
A standard residential mortgage does not authorise short-term letting. If you let your property on a short-term basis without informing your lender, you are likely in breach of your mortgage terms. Specialist short-let mortgage products exist, but this needs to be confirmed with your specific lender before you begin.
Standard landlord insurance is written for residential tenancies. Short-term guests present different risks, and a standard policy will typically not cover commercial short-let activity.
On safety, the requirements for a holiday let are not identical to those for a standard tenancy. The annual gas safety check still applies where there is gas. Holiday lets require a written fire risk assessment, suitable alarms, and fire safety measures appropriate to the property and its use. Regular electrical condition checks are strongly advised, even where they are not prescribed in identical terms to the five-yearly EICR requirement for residential tenancies. Operating without these in place creates both safety and liability exposure.
Thinking about short-term or long-term letting? Talk to our lettings team about which suits your property