Pressure Mounts on Holiday Let Owners Amid New Tax Proposals

By the Editorial Team · Sunday, September 27, 2026

The UK government’s proposed Overnight Visitor Levy and recent tax changes are increasing financial and regulatory challenges for holiday let owners, prompting a shift toward longer-term corporate lettings. These measures risk reducing the number of small-scale rental properties, which could negatively impact local economies and shift the market toward larger, professional operators.

A range of new tax measures and regulatory changes are intensifying pressures on owners of holiday let properties across the United Kingdom, according to industry insiders and recent market data. These developments come amid rising costs and shifting market dynamics that are already prompting some property owners to reconsider their involvement in the sector.

The UK government announced on September 10 a proposed Overnight Visitor Levy Bill, which, if enacted, could impose a tourist tax of up to 5 percent on overnight stays beginning in early 2028. Industry representatives warn that this additional charge could further strain short-term rental operators, many of whom have limited scope to increase rental prices due to affordability constraints among holidaymakers.

Merilee Karr, chief executive of Under the Doormat, a consortium of short-term rental companies, highlighted that many hosts feel “squeezed” by a combination of tax increases and rising operational expenses. She emphasized that a significant portion of these hosts are ordinary individuals who rely on holiday lets to supplement income, such as farmers renting out annexes or pub owners with adjacent holiday homes. Karr added that adding further financial burdens risks leaving more properties empty, which would negatively affect local businesses and communities, particularly in popular destinations like Cornwall and Devon.

Recent data from estate agency Hamptons shows uneven regional trends in the holiday let market. The number of new holiday let companies registered in the southwest of England declined by 20 percent last year, while registrations increased by 25 percent in London and 47 percent in the West Midlands. Canan Wood, Hamptons’ director of corporate and relocation services, attributed this to a shift from lifestyle-focused investments to those emphasizing financial yield. She noted that areas such as Birmingham offer greater opportunities due to lower property costs, available land, and fewer regulatory restrictions.

In response to changing regulations, many holiday let owners and traditional buy-to-let landlords have reportedly shifted toward corporate lettings, leasing properties to business tenants for longer periods, typically two to three months. This approach is seen as less complex, with more reliable rent payments and fewer tenant-related issues compared to short-term holiday lets.

Several tax and regulatory changes have altered the landscape for holiday lets in recent years. In April 2025, the government abolished the furnished holiday lettings (FHL) tax regime, removing tax advantages that allowed owners to offset income with expenses for furniture, fittings, and other operational costs. This change subjects holiday lets to the same tax rules as long-term rental properties. Additionally, mortgage interest relief has been capped at 20 percent, aligning holiday lets with buy-to-let landlords and reducing earlier fiscal benefits.

Other measures include tighter business rates rules introduced in April 2023, requiring holiday lets in England and Wales to meet minimum availability and rental thresholds to qualify for business rates rather than council tax. Scotland has implemented a mandatory licensing scheme for short-term lets since October 2023, with similar regulations set to follow in England and Wales within the year. Furthermore, local councils in Wales may charge increased council tax premiums on second homes and short-term lets.

These developments are occurring alongside enhanced data-sharing requirements that compel digital booking platforms to report hosts’ annual rental income to tax authorities starting January 2024, increasing tax compliance scrutiny.

While some observers predict that the proposed tax changes may yield minimal additional revenue for the Treasury, especially in urban areas such as London, the cumulative impact is shaping a sector that increasingly favors larger, more professional operators. However, many holiday let owners remain microbusinesses facing significant barriers to adapting to the evolving regulatory and fiscal environment.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.