If you own a holiday let in the UK, it’s essential to understand how VAT (Value Added Tax) applies to your business. VAT can seem complicated, but with the right information, you can ensure you’re complying with the rules and potentially saving money in the process. This blog will help you navigate the VAT rules for holiday lets in the UK. It will clarify whether you need to register for VAT and how to go about it.
1. Do You Need to Register for VAT on your holiday let?
In the UK, VAT is a tax that is added to most goods and services. As a holiday let owner, whether you need to register for VAT depends on your rental income and the nature of your services. Here’s what you need to know:
- VAT Threshold: The first thing to understand is the VAT registration threshold. If your taxable turnover exceeds £85,000 (as of 2025), you must register for VAT. This threshold applies to the total income from all taxable activities, including holiday lets. It is assessed on the rolling 12-month period. If your turnover falls below this threshold, you’re not required to register for VAT, but you can choose to do so voluntarily.
- Exemptions for Short-Term Accommodation: In most cases, holiday lets in the UK are considered “short-term” accommodation. This is where the rules can get a bit tricky. According to UK VAT rules, holiday lets are typically exempt from VAT when the property is rented out for short periods. This means no VAT is charged on the rent you receive. However, the exemption only applies if the property is let for a continuous period of less than 28 days. If the period exceeds 28 days, VAT may apply, and different rules could come into play.
2. When Is VAT Charged on Holiday Lettings?
VAT is generally not charged on the rental of holiday lets, but there are certain circumstances where it might apply:
- Long-Term Lettings: If you let your property on a long-term basis (for periods exceeding 28 days), this type of letting may not qualify for the exemption. You may have to charge VAT on the rent. However, this is rare for holiday lets, as most owners rent out their properties on a short-term basis.
- Additional Services: If you provide additional services along with the holiday let (such as cleaning, catering, or other services that are subject to VAT), you may need to charge VAT on those services. This is especially relevant if you offer “hotel-like” services, where VAT would apply to the accommodation as well as the extras.
- Holiday Let as Part of a Larger Business: If your holiday let forms part of a broader tourism-related business (such as running a hotel or B&B alongside your holiday cottages), then VAT might apply to all services you provide, including accommodation and any additional services.
3. How Do You Register for VAT for your holiday let?
If your holiday let’s taxable turnover exceeds the VAT registration threshold of £85,000, you’ll need to register with HMRC. Here’s a quick overview of how the process works:
- Online Registration: You can register for VAT through the HMRC website. The process is relatively straightforward but can take several weeks to complete. It is important to get started as soon as possible once your turnover reaches the threshold.
- Voluntary Registration: Even if your turnover doesn’t reach the £85,000 threshold, you can still choose to register for VAT voluntarily. Many holiday let owners choose voluntary VAT registration because it allows them to reclaim VAT on eligible business expenses, such as maintenance, repairs, and management costs.
4. What Are the Benefits of VAT Registration for your holiday let?
While VAT registration is an obligation for some holiday let owners, it can also bring benefits:
- Reclaim VAT on Business Expenses: Once registered, you can reclaim VAT on business-related expenses, which may include costs for maintenance, renovations, and professional services, such as accountants or property managers. This can be particularly advantageous if you spend a significant amount on keeping your property in good condition.
- VAT on Holiday Let Charges: For some property owners, being VAT-registered might allow you to reclaim VAT on the services you provide to guests, such as cleaning, providing linen, or offering additional amenities. However, be mindful of whether you’re charging VAT on these services as well.
- Enhanced Credibility: Being VAT-registered can also give your holiday let a more professional appearance, especially if you are dealing with large companies or high-net-worth guests who expect businesses to be VAT-registered.
5. What Happens If You Don’t Register for VAT?
If your taxable turnover exceeds the £85,000 threshold and you fail to register for VAT, you could face penalties from HMRC. The penalty could be a percentage of the VAT you should have paid, and interest will be added on top of any unpaid VAT. It’s important to stay on top of your finances and register for VAT when you are required to do so to avoid these penalties.
If your turnover is below the £85,000 threshold, registration is not mandatory, but it’s still worth keeping track of your turnover to ensure you don’t exceed the threshold by mistake.
6. VAT and Holiday Let Management Services
Some holiday let owners employ property management services to handle bookings, maintenance, and other aspects of their business. The VAT treatment for these services depends on the specific service being provided:
- Booking Services: If a property management company charges for booking services (handling reservations, marketing, etc.), VAT may apply to those services.
- Maintenance and Cleaning Services: If you hire a service for property maintenance or cleaning, VAT may also apply to these services. These costs may be reclaimable if you’re VAT registered.
7. VAT and Airbnb or Other Platforms
If you list your holiday let on platforms like Airbnb, Booking.com, or Vrbo, it’s important to remember that VAT may still apply depending on your circumstances. These platforms will generally collect the rental income on your behalf. However, if you’re VAT-registered, you may need to account for VAT on the rental income you receive through these platforms, particularly if you’re providing additional services such as cleaning.
Understanding VAT for holiday lets in the UK can be complex, but it’s crucial for running a compliant and successful business. If your taxable turnover exceeds the VAT threshold, registering for VAT is a legal requirement. It can also provide benefits such as reclaiming VAT on business expenses. Always keep track of your rental income. Be aware of the different rules that apply to short-term lets, long-term lets, and additional services.
If you’re unsure whether you need to register for VAT, it’s always a good idea to consult with an accountant or tax advisor who specialises in holiday letting. This ensures that you remain compliant with the rules and can take full advantage of any VAT-related benefits.
If you are looking for a holiday letting agent, do get in touch!
