If you own a second home in an area that attracts tourists, you might have considered renting it out to holidaymakers while it’s vacant. While this can be a profitable and fulfilling side business, there’s plenty to consider first. In this article, we explore what you need to think about when renting out your holiday home to guests.
Check your mortgage
Before getting started, contact your mortgage provider for permission to rent out all or part of your second home. Standard residential mortgages often don’t permit short-term rentals, but there may be the option to switch to a holiday let mortgage.
Some lenders assess affordability based on projected rental income rather than personal earnings and may impose different loan-to-value limits. Discuss your options with your lender to ensure you meet their terms and explore mortgage products designed for holiday lets.
Check planning permissions
It’s worth contacting the local planning authority where your second home is located to confirm whether you need permission and understand any conditions that apply to holiday lets in your area.
Regulations around holiday rentals vary widely depending on location. Even within the UK, rules differ between England, Scotland, and Wales, covering everything from tax obligations to planning permissions.
If you’re planning on converting part of the property to become a short-term rental, including outbuildings, you will likely need planning permission, and a 'Change of Use' application could be required.
Be aware of recent tax changes
In April 2025, the Furnished Holiday Lettings (FHL) tax regime was abolished, meaning that holiday lets are taxed in the same way as other rental properties.
If you ran a qualifying furnished holiday let during the 2024–25 tax year, which ended on 5 April 2025, you can still claim the tax benefits when submitting your return for that period. This means you may be able to deduct the full cost of mortgage interest, claim capital allowances on furnishings, and benefit from capital gains tax relief if you sell the property. Additionally, income from your holiday let can still count as pensionable earnings for that tax year.
However, from the 2025–26 tax year onward, these specific tax breaks for furnished holiday lets will no longer apply, and all holiday rental income will be taxed as standard property income.
However, as holiday lets fall under business rates instead of council tax, this means you will likely not need to pay council tax on your second property when renting it out. To qualify, the property needs to be available for at least 140 days a year and rented out for 70+ days.
Consider stamp duty for second homes
It’s worth noting that when purchasing a second residential property valued at over £40,000, you’ll typically need to pay the additional stamp duty surcharge for second homes. This applies whether you're buying for investment as a Buy to Let, as a holiday home, or for any other reason.
Get the right insurance
Without the right protection, you could leave your holiday home exposed to unexpected risks. When the property is empty, issues like burst pipes, storm damage, or vandalism can arise. When guests are staying, accidents happen. Someone might get injured, or valuable furnishings could be damaged.
For the most part, standard home insurance isn’t suitable for holiday lets, so it’s important to get tailored cover in place. Look for policies that include public liability in case guests get injured, contents cover for accidental damage, and protection for loss of rental income if the property becomes uninhabitable due to an insured event. Some insurers even offer alternative accommodation cover, so you can relocate guests if needed.
Second home insurance with Towergate
At Towergate, we can help to combine your property insurance with the additional covers that are required for renters including loss of income, alternative accommodation and employers’ liability. Want to know more? Get in touch with your usual Towergate adviser.
About the author
James Cooper is a respected industry leader with around 10 years' experience in the home and property insurance sector. He works across a broad range of insurance product and policy development and delivery, including product development; customer sales and marketing; and P&L accountability.
Sources
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thetimes.com/money-mentor/holiday-lettings/let-your-house-as-holiday-let
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hoa.org.uk/advice/guides-for-homeowners/i-am-buying/holiday-let-mortgage
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.
