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Holiday Lets and AirBnB tax changes: does this mean an increase in local housing?

From April 2025, landlords who let out short-term furnished holiday properties will have no tax advantage over those letting to longer-term tenants. In this post, we look at the potential impact of this change on the housing market.

As announced in the Spring Budget, the beneficial tax treatment of furnished holiday lettings will be abolished from 6 April 2025. From that date, short-term let businesses will be taxed in the same way as other residential property businesses.

In short; holiday lets have always been taxed more favourably that standard buy-to-lets (B2L). This change means they no longer will be.

So, without the tax incentive, if a landlord has a choice between straightforward B2L and, what will they choose?

Landlords face three options

Most of the current arguments will remain as to why some do – and some don’t – choose to manage holiday lets. Many property owners will roll with the changes and carry on operating as they do now. However, the loss of favourable tax is bound to have an impact.

There will undoubtedly be fewer investors who opt for this high-return, high-risk strategy. So, what will they do instead?

Choice one: do nothing and carry on regardless
Choice two: switch to ‘normal’ B2L
Choice three: sell the property and exit the market



Their choices will impact the local housing market

Some investors will opt for choices two and three, so there is going to be a change in housing supply – be that an increase in rental properties, an opportunity for first-time buyers and investors, or both.

Choice two – landlords switching to a traditional buy-to-let structure – will increase the supply of local rented properties. Choice three – landlords selling their properties – will result in the same thing, assuming that some of the available properties are bought by other landlords/investors. Owner occupiers will also see more properties coming to the market.

Another benefit to local residents will be a reduction in the anti-social behaviour. ‘Bad actors’ get away with more, in this unregulated section of the housing market, upsetting their neighbours. The revoking of tax benefits will cause some of them to exit.

There will be ripple effects in the local economy

It’s worth noting, these choices will have drastically different impacts depending on whether they’re made in relation to city centre apartments, or country retreats. The same choice in different areas can lead to significantly different results – some good, some bad.

For example, in many areas, a reduction in the supply of attractive holiday accommodation will have a negative impact on tourism. This could affect the income of local residents who depend on the sector. There may well be an increase in available rental properties but that won’t help the tenant who loses their income and can’t afford to live in the area.

The changes don’t go far enough

This change in legislation is massively overdue. It creates fairness between landlords, when it comes to tax. While that’s a step in the right direction, there are more urgent issues in the short-term accommodation sector. Addressing those first could have created a greater positive impact.

We would’ve preferred to see the mirroring of landlord regulations, before aligning the tax treatment of income and expenditure. It’s always been nonsensical to allow holiday lets to avoid the very same health and safety protection that long-term tenants enjoy.

These tax changes treat the symptom, not the cause. It feels like allowing the tail to wag the dog, by changing investors’ behaviours for an indirect reason.

@homesureproperty Breaking news: new planning rules for short-term lets The UK government announced yesterday that #PlanningPermission will be required for future short-term lets, and there will be a new mandatory national register of shot-term lets. According to the statement, ‘These changes are part of a long-term plan to prevent a “hollowing out” of communities, address anti-social behaviour and ensure local people can continue to live in the place they call home.’ What do you think? What other legislation is coming down the line? Our guess is, this is just the beginning. Does this impact your business? Are you considering switching to more traditional lettings contracts? If so, or if you have questions about the process and the benefits, drop them in the comments and we’ll answer 👇 #propertymanagementservices #liverpoolproperty #buytolet #airbnbpr #propertynews #propertyinvestment #propertyinvestmentuk #airbnb #propertyportfolio ♬ The Champion – Lux-Inspira

There is still a huge demand for short-term accommodation; it makes sense to harness that power for good, rather than shutting it down. Let’s hope there are more legislative changes coming, to create greater parity between landlords, and more consistency in the level of safety and service tenants can expect, whether renting short or longer-term.

If you’re a property investor interested in alternatives to short-term lettings, Homesure Property can support you. Whether you want to sell, switch to a more traditional B2L model, or discuss the merits of both options, book a free property investment consultation call with one of our directors.

Nicholas Stott

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