Costs of Running a Holiday Let Business

The 9 main holiday let management costs that you should be aware of are:

#1 Cost of Property Purchase

This is your first outlay of capital, especially if you have to purchase a new property for your letting business. The cost of acquiring the property depends on its area, the amenities present, the type, and the number of rooms in it.

The estimated cost for this stage could start from a few hundred thousand pounds to millions. There is really no limit to how far the cost may be.

On top of this, you also have to consider your mortgage costs. This can vary depending upon market conditions - something you can find more about in our holiday let mortgage guide.

2. Setup and furnishing costs

Before your first guest arrives, you need the property guest-ready.

Furnishing and fit-out

Budget £5,000 to £15,000 for a full furnish of a 2-bedroom property, depending on the standard you are targeting. Essential items: quality mattresses and bedding, towels, kitchenware, a reliable Wi-Fi router, smart lock or key safe, and basic entertainment (TV with streaming). Going premium (designer furniture, hot tub, high-end appliances) can push this to £25,000+, but only makes sense if the nightly rate justifies it.

Photography

Professional listing photos cost £150 to £400. This is not optional. Listings with professional photography earn 20% to 30% more in bookings on average.

Safety compliance

Fire risk assessment, smoke and CO alarms, fire extinguisher and blanket, gas safety certificate (annual), electrical installation condition report (EICR), PAT testing for appliances, and a legionella risk assessment if the property has water systems. Budget £300 to £600 for the initial round of checks, then £150 to £300 annually for renewals. Our guide to holiday let fire regulations covers the specific requirements.

Permits and planning

Depending on your location, you may need planning permission for change of use. In some areas (Scotland, parts of Wales), you need a licence. Check our guide on short-term let planning permission to understand what applies to your property.

3. Insurance

Standard home insurance does not cover holiday letting. You need a specialist holiday let insurance policy that covers:

• Buildings and contents (including guest damage)
• Public liability (typically £2m to £5m cover)
• Loss of rental income
• Employer's liability (if you hire cleaners or staff)

Annual premiums range from £300 to £800 for a standard 2-3 bedroom property. Higher-value properties, properties with hot tubs or pools, and listed buildings cost more.

Do not skip this. One guest injury claim without public liability cover could cost you the property.

4. Business rates and tax

Holiday lets in England are assessed for business rates rather than council tax, provided the property is available for short-term letting for at least 140 days per year.

Small business rates relief

If your property's rateable value is below £15,000, you may qualify for 100% small business rates relief, meaning you pay nothing. Between £15,000 and £51,000, you get partial relief.

Furnished Holiday Lettings (FHL) tax regime

The FHL regime previously offered significant tax advantages (capital allowances, mortgage interest relief, pension contribution eligibility). This regime is being phased out. Check our guide to the FHL tax regime for the current status and what it means for your tax position.

Income tax

Rental income from holiday lets is taxable. You can deduct allowable expenses (management fees, insurance, maintenance, utilities, cleaning) from your gross income. See our guide to holiday let tax rules for the full breakdown.

5. Ongoing running costs

Cleaning (per changeover)

£50 to £150 per clean depending on property size and location. For a 2-bedroom property with weekly changeovers, budget roughly £300 to £600 per month during peak season.

Utilities

Electricity, gas, water, council tax or business rates, broadband, TV licence, and streaming subscriptions. Budget £200 to £400 per month. Guests use more energy than long-term tenants because they are less careful with heating and lights.

Linen and consumables

Professional linen service: £15 to £30 per changeover (or invest in your own linen and launder). Welcome pack basics (tea, coffee, milk, biscuits, local information): £5 to £15 per guest.

Maintenance and repairs

Budget 1% to 2% of property value per year for ongoing maintenance. Things break faster in holiday lets than in long-term rentals. Guest-facing items (kettles, toasters, shower heads, door handles) need replacing regularly. Setting aside £100 to £200 per month covers most properties.

Garden and grounds

If applicable, professional gardening costs £30 to £80 per visit, typically fortnightly during growing season.

For a full breakdown of what management companies charge, see our guide to property management fees in Australia.

6. A worked example: total annual cost for a 2-bed holiday let

Here is what a typical 2-bedroom holiday cottage in a popular UK location might cost annually:

• Management fees (20% of £30,000 gross revenue): £6,000
• Cleaning (40 changeovers at £80): £3,200
• Insurance: £500
• Utilities: £3,600
• Maintenance and repairs: £1,800
• Linen and consumables: £1,200
• Safety compliance (annual renewals): £250
• Business rates (if above relief threshold): £0 to £2,000
• Total annual running cost: £16,550 to £18,550

Against £30,000 in gross revenue, that leaves roughly £11,500 to £13,500 net before income tax. The biggest lever is occupancy: a well-managed property achieving 70% occupancy in a strong location can push gross revenue to £40,000+, which dramatically changes the net position.

7. How to reduce costs without cutting quality

1. Negotiate management fees. If your property is high-value or you have multiple properties, you have leverage. Even a 2% reduction on a £30,000 property saves £600/year.
2. Bundle services. Agents who handle cleaning, linen, and guest management in one package often cost less than sourcing each separately.
3. Invest in durability. Spending more on hard-wearing furniture and fittings reduces replacement frequency. Commercial-grade mattresses and stain-resistant fabrics pay for themselves within a year.
4. Use smart home technology. Smart thermostats, automated check-in (key safes or smart locks), and noise monitors reduce utility waste and management overhead.
5. Optimise changeover days. Standardising check-in/check-out days reduces empty nights between bookings and makes cleaning logistics simpler.

For more on deducting these costs against your tax bill, see our guide to Airbnb tax in the UK.

FAQs

How much does it cost to start a holiday let?

Setup costs for a 2-bedroom property typically range from £5,000 to £20,000, covering furnishing, photography, safety compliance, and initial marketing. This excludes the property purchase or mortgage costs.

What are typical holiday let management fees in the UK?

Full-service agents charge 15% to 25% of gross booking revenue. Some charge a flat monthly fee instead (£150 to £500/month). Setup fees of £100 to £300 are common.

Are holiday let costs tax deductible?

Yes. Management fees, insurance, cleaning, maintenance, utilities, advertising, and most other operating costs are deductible against your rental income.

Is a holiday let more expensive to run than a long-term rental?

Yes, on a per-month basis. Cleaning, utilities, and management fees are all higher. But gross revenue from a well-managed holiday let can be 30% to 60% higher than a long-term tenancy, which often more than offsets the extra costs.

How much can I earn from a holiday let?

This depends entirely on location, property quality, and management. The fastest way to get a realistic estimate is to check what comparable properties earn in your area.