This article is about short-term and holiday letting generally — whichever platform or booking route is used, Airbnb, Booking.com, Vrbo or direct bookings — not specifically about the Airbnb platform itself, even though “Airbnb” is how many people search for and talk about this decision.
The underlying question doesn’t change with the platform: would a specific property genuinely make more money let nightly to guests than let conventionally to a long-term tenant, once occupancy, costs, regulation and the owner’s own time are all properly accounted for?
Regulation last checked: 15 September 2026.
The calculation that misleads almost everyone
A long-term tenant paying £1,400 a month looks unambitious next to a short-term nightly rate of £140. Multiply £140 by 30 and the property appears to generate £4,200 a month — three times the long-term figure.
But the comparison quietly treats two very different income models as though they were equivalent. The £1,400 represents rent for an occupied month. The £140 is the price of a single night that still has to be sold.
At £140 a night, a property occupied every night of a 365-day year would generate £51,100. That is mathematically correct and commercially close to meaningless for most properties, because short-term accommodation has to keep winning each night of occupancy separately.
There is another subtle problem with the £140 figure itself. The rate that matters is not necessarily the most attractive price visible on a listing during a summer weekend, major event or school holiday. What matters is the average rate the property can genuinely achieve across all the nights it manages to sell, including quieter weekdays, lower-season dates and any discounts needed to fill gaps.
The useful question therefore isn’t what the property could earn if every night sold at its best-looking rate. It is how many nights it can realistically sell, at what genuine average rate, and what survives after doing so.
Occupancy is the number that actually decides this
Short-term letting income depends heavily on how many nights a year the property is actually booked, and that figure can vary enormously with location, season, property type, pricing, competition and the reason people travel to the area.
A property in a strong year-round visitor market may sustain demand across much of the year. Another property may command an impressive rate during summer, festivals or school holidays and then struggle through quieter months and midweek periods.
Applying a realistic occupancy assumption to the same £140-a-night example changes the picture quickly. At 60% annual occupancy, the property generates £30,660 of gross short-term revenue. At 40%, that falls to £20,440.
There is another useful way to look at those figures. The conventional tenancy at £1,400 a month produces £16,800 of potential annual rent before its own costs and any void between tenancies. At £140 a night, the short-term property needs 120 booked nights — about 32.9% annual occupancy — merely to match that £16,800 at gross revenue level.
| Short-term bookings | Annual occupancy | Gross short-term revenue | Extra gross revenue over £16,800 long-term rent |
|---|---|---|---|
| 120 nights | 32.9% | £16,800 | £0 |
| 146 nights | 40% | £20,440 | £3,640 |
| 219 nights | 60% | £30,660 | £13,860 |
That is before either option’s operating costs.
And this distinction matters: 32.9% is the gross-revenue break-even point, not the profit break-even point. Because short-term letting typically creates additional cleaning, utilities, linen, booking and management costs, its occupancy normally has to rise materially above that figure before it actually produces the same retained profit as the long-term alternative.
The 40% example is particularly revealing. Short-term letting appears at first to earn substantially more because £140 looks so much larger than a conventional daily equivalent of monthly rent. Yet at 40% occupancy it has only £3,640 of additional annual gross revenue with which to pay every extra cost created by the short-term model.
That is why occupancy matters so much more than the nightly rate on its own.
The cost base is genuinely different, not just smaller
Long-term letting has real ongoing costs, covered in full in our companion articles on buy-to-let profitability. It is not a cost-free alternative to short-term letting.
But short-term accommodation has a materially different cost structure because of the amount of turnover involved.
Cleaning may be required after every stay rather than between tenancies that could last a year or longer. Linen has to be laundered and replaced. Utilities and broadband are normally paid by the operator rather than the guest. The property is generally furnished for repeated visitor use and those furnishings experience more turnover.
Then there are consumables, booking or payment-platform charges where applicable, specialist management if it is outsourced, appropriate insurance, and the practical costs generated by dozens of different sets of occupants rather than one household occupying the property continuously.
Some of those costs can be charged separately to guests or built into the nightly rate, but that doesn’t make them disappear. The useful question is what the owner retains after the entire operating model has been paid for.
Return to the 40% occupancy example. Its £20,440 gross revenue is only £3,640 ahead of the long-term property’s £16,800 headline rent. Cleaning, utilities, laundry, booking costs and the additional work of running the short-term property have to fit inside that £3,640 difference before short-term letting is actually ahead.
At 60% occupancy there is much more room — £13,860 of additional gross revenue — but it is still revenue rather than profit.
And even occupancy itself does not tell the whole operational story. Two properties can both achieve 60% occupancy and create dramatically different workloads depending on how long guests stay.
At 60% occupancy, this example produces about 219 occupied nights a year. If the average booking is two nights, that implies roughly 110 changeovers. If the average stay is seven nights, it is closer to 31 changeovers.
Both properties have the same occupancy. One requires more than three times as many arrivals, departures, cleans, linen changes and opportunities for something to go wrong.
Average length of stay therefore belongs alongside occupancy and average nightly rate when the short-term model is assessed properly.
The value of the owner’s own time
This is where short-term letting most clearly differs in character from long-term letting, and it deserves to be treated as a genuine cost rather than an afterthought.
Someone personally coordinating cleaners between stays, answering guest messages and enquiries, managing availability and pricing, handling access problems, restocking supplies and dealing with reviews is running something closer to a small hospitality operation than simply collecting rent from a tenant.
That distinction matters even where the spreadsheet shows an attractive financial margin.
The owner can outsource much of the work to a specialist management company, but then the management fee belongs in the comparison. Alternatively they can retain more of the gross revenue by doing the work themselves, but their time has not suddenly become free because no invoice was issued for it.
A short-term property making £5,000 more in annual cash than the long-term alternative may be attractive if it requires little additional involvement. The same £5,000 looks different if earning it creates hundreds of hours of additional work, interruptions and operational responsibility during the year.
The financial comparison and the workload comparison therefore belong together.
Tax: the position changed significantly from April 2025
Anyone whose understanding of short-term-let taxation predates April 2025 is working from an outdated picture.
The Furnished Holiday Lettings regime, which gave qualifying properties several tax advantages over ordinary property businesses, was abolished from 6 April 2025 for Income Tax and Capital Gains Tax and from 1 April 2025 for Corporation Tax.
The former advantages included different treatment of finance costs, capital allowances on qualifying expenditure, access to certain capital-gains reliefs associated with trading businesses and treatment of FHL income as relevant earnings for pension-relief purposes. HMRC explains the changes in its official guidance on the abolition of the Furnished Holiday Lettings tax regime.
For individual landlords, the removal of the special regime means finance costs on former FHL properties can now fall within the basic-rate finance-cost restriction applying to other residential property businesses. That can materially affect a heavily mortgaged short-term let.
The old regime did not, however, disappear with no transitional provisions at all. HMRC retained specific transitional rules, including treatment of existing capital-allowance pools and losses, so an established former FHL business may have legacy tax positions that need individual advice rather than simply treating 6 April 2025 as though its entire tax history vanished overnight.
There is another tax distinction worth knowing because it can become important for larger operators. The abolition of the FHL income-tax regime did not abolish the VAT treatment of holiday accommodation. Holiday accommodation remains subject to the normal VAT rules for taxable accommodation supplies, explained in HMRC’s VAT guidance for hotels and holiday accommodation. The current compulsory VAT-registration threshold is £90,000 of taxable turnover. Current VAT thresholds
That will not affect every owner of one short-term property, but it matters as turnover grows and is another reason not to assume short-term and conventional residential letting have become identical simply because the old FHL regime ended.
Regulation is where this decision gets genuinely complicated
This is the area most likely to catch an owner relying on general advice rather than checking the property itself, because there is no single UK short-term-letting regime.
Greater London
London retains its specific 90-night planning rule.
Residential premises liable for Council Tax can generally be used for temporary sleeping accommodation for up to 90 nights in a calendar year without that use itself requiring planning permission. Going beyond the 90-night limit requires planning permission from the relevant London borough.
The limit applies to the property across the year rather than separately to each booking platform. The owner therefore remains responsible for total use even if bookings come from several different channels. London City Hall sets out the rules in its guidance on short-term and holiday lets in London.
England outside London
There is no equivalent blanket national 90-night limit outside London.
Whether use of a particular residential property for short-term accommodation requires planning permission depends on the nature and intensity of that use and whether the local planning authority considers that a material change of use has occurred. The practical answer is therefore property-specific rather than simply “short-term letting is permitted everywhere outside London”.
England is also introducing a mandatory national registration scheme for short-term lets. As at 15 September 2026, the government’s current guidance still describes the registration requirement as not yet in force, so an owner reading this later should check its live status rather than assume this paragraph remains current. The government’s central reference is its guidance for self-catering holiday homes in England.
The business-rates position can matter too. In England, a self-catering property can fall within business rates where, among other requirements, it was available commercially for at least 140 nights and actually let for at least 70 nights during the relevant 12-month period, with an intention to make it available for at least 140 nights in the following year. The detailed tests are set out in the government’s business-rates guidance for self-catering accommodation.
Scotland
Scotland operates a mandatory short-term-let licensing regime. Hosts and operators who require a licence must have one before taking bookings or receiving guests.
Planning is a separate issue from licensing. Scotland currently has short-term-let control areas covering the City of Edinburgh and the Badenoch and Strathspey Ward in Highland, where planning rules can impose an additional hurdle for relevant changes of use. A property outside a control area can still require planning permission where its use amounts to a material change.
The Scottish Government maintains current guidance on short-term-let licensing and regulation in Scotland.
That means a Scottish property can need both an appropriate licence and, depending on the circumstances, planning permission. One does not automatically substitute for the other.
Wales
Wales is in the middle of a substantial regulatory change.
Registration of visitor accommodation is due to open in October 2026, and providers taking bookings for qualifying overnight stays will be required to register with the Welsh Revenue Authority by 31 March 2027. The Welsh Government explains the timetable in its visitor-accommodation registration guidance.
A separate 2026 Act has also created the legal framework for a visitor-accommodation licensing scheme, with the Welsh Government planning to introduce licensing beginning with self-catering accommodation. Registration and licensing should therefore not be treated as though they are the same requirement. Welsh visitor-accommodation licensing plans
Wales also applies a substantially higher occupancy test than England before self-catering accommodation is normally assessed for business rates rather than Council Tax: it generally needs to have been available for at least 252 nights and actually let for at least 182 nights during the relevant period, subject to the detailed rules and the averaging provisions applying from April 2026. Business-rates tests for self-catering accommodation in England and Wales
Northern Ireland
Northern Ireland has a different system again.
Tourism and visitor accommodation must hold a current Tourism Northern Ireland certificate before operating. For self-catering accommodation this involves statutory inspection, with the certificate currently valid for four years. Tourism NI self-catering certification guidance
That certification should not be read as meaning there can be no other planning, rating, mortgage, insurance or property-specific requirements. It is the national tourism-accommodation requirement around which the rest of the property’s position still needs to be checked.
Across all four nations, the safest conclusion is therefore deliberately unexciting: check the rules for the actual property rather than relying on a UK-wide assumption about short-term letting.
Leasehold flats: check the lease before anything else
For a flat owner, none of the financial modelling matters if the lease prevents the intended use.
Lease terms can restrict subletting, business use or occupation in ways that make repeated short-term guest accommodation difficult or prohibited. The exact wording matters, so “my neighbour does Airbnb” is not evidence that a particular lease allows it.
The lease should therefore be checked before money is spent furnishing the property for short-term use, and unclear wording is a sensible point at which to obtain legal advice.
A strong prospective nightly rate cannot override the contractual terms governing the property.
Mortgage and insurance restrictions
The same principle applies to the mortgage and insurance.
A mortgage suitable for an owner-occupied home or conventional long-term buy-to-let should not simply be assumed to permit repeated short-term guest occupation. The lender’s actual terms need checking and, where required, the appropriate consent or lending product needs to be in place.
Insurance is equally important. Short-term holiday accommodation creates a different occupancy pattern from either an owner-occupied home or a conventional tenancy, so the policy needs to cover the actual use of the property. Current government guidance for English holiday lets recommends dedicated holiday-let insurance, public-liability cover and buildings and contents cover suitable for short-term letting. Government guidance on insurance and other requirements for English holiday lets
Operating outside a mortgage or insurance policy’s terms is a poor way to discover that the headline short-term return was never genuinely available in the first place.
Comparing the two honestly: annual, not monthly-versus-nightly
The only fair comparison is annual.
For the short-term option, that means realistic booked nights multiplied by a defensible average nightly rate, not the best summer Saturday rate multiplied across the calendar. From that revenue come the extra costs created by operating short-term accommodation, along with an honest value for the owner’s time where that work is not otherwise being paid for.
Against it sits the long-term option: achievable annual rent, realistic voids, management where applicable, maintenance, insurance, compliance, financing and tax.
The £140-versus-£1,400 example demonstrates why the comparison can turn so quickly. At 40% occupancy, short-term letting produces £20,440 gross against £16,800 of potential long-term rent — only £3,640 more before the additional short-term operating burden is paid. At 60%, the gross advantage becomes £13,860 and there is far more room for short-term letting to emerge ahead.
There is another trade-off that has become more important in England since 1 May 2026: control over when the property becomes available again.
Under the Renters’ Rights Act changes, conventional assured tenancies in England now operate on a periodic rather than fixed-term basis, Section 21 no-fault eviction has ended, and a landlord who wants possession because they intend to sell or move into the property must use the relevant possession ground and process. Those selling and moving-in grounds cannot require possession during the first 12 months of a new tenancy, and generally involve four months’ notice. Renters’ Rights Act guidance for landlords in England
That does not make long-term letting unattractive, and it applies specifically to England rather than the whole UK. It does mean that someone who values being able to use, sell or change strategy with a property at relatively short notice needs to treat flexibility as part of the comparison rather than looking only at annual income.
Short-term letting has its own planning, licensing and operational restrictions, but it usually represents a very different form of occupancy from giving a household their home under a conventional residential tenancy.
The financial question remains: how much additional gross revenue does short-term letting create at a realistic occupancy and achievable average nightly rate, and how much of that additional revenue survives the additional work and costs required to produce it?
For some properties the answer will be “a lot”. For others, surprisingly little.
The actual decision
Short-term letting can outperform long-term letting financially, in the right location, for the right property, run well.
But “run well” is doing real work in that sentence.
It can mean achieving enough occupancy outside peak periods to justify the model, maintaining a strong average booked rate rather than relying on occasional premium nights, attracting stays long enough that constant changeovers do not consume the margin, managing the property efficiently, keeping operating costs under control and either accepting the workload personally or paying someone else to absorb it.
Long-term letting gives up the possibility of much higher nightly revenue, but in return generally offers a more predictable income pattern and dramatically fewer occupant turnovers. In England it now also represents a more significant commitment to a tenant than the old assumption of a simple fixed-term tenancy ending on a chosen date.
Short-term letting potentially earns a premium because it asks the property — and usually its owner or manager — to do considerably more. Where that premium is large enough, the model can be compelling. Where it is only a few thousand pounds of extra gross revenue, it can disappear surprisingly quickly into the cost and effort required to earn it.
The choice should therefore not begin with “£140 a night sounds better than £1,400 a month”.
It should begin with the property’s realistic annual demand, the average rate those booked nights can genuinely achieve, how frequently guests will turn over, the additional revenue that remains after operating costs, the time required to run it, and whether the property is legally and contractually capable of being operated that way in the first place.
Once those things are included, the higher nightly rate can still win.
It just has to earn the right to.
This article provides general information and is not personalised financial, investment, mortgage, tax or legal advice. Short-term letting rules, planning requirements, tax treatment, licensing, registration, business-rates treatment and property restrictions vary between circumstances and UK jurisdictions and can change. Confirm the current position for a specific property with the relevant authority and obtain appropriate professional advice before operating a short-term or holiday let.
