Why Holiday Lets Are Still a Good Property Investment in 2024

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Should Investors Consider Holiday Lets Following the Spring Budget?

With Jeremy Hunt’s change to tax breaks for furnished holiday lets, many investors may wonder whether this type of property investment is worth it.

However, some industry experts have shed light on the subject, with people like Rob Oliver, director of distribution at Dudley Building Society, insisting that the holiday lets market should continue to see demand from landlords looking to diversify their portfolios.

Discover More: If you want to understand how buy-to-let works, dive into our guide on the top reasons to invest in a buy-to-let.

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What Tax Changes Are Affecting Holiday Lets?

Chancellor Jeremy Hunt’s Budget announcement to end certain tax breaks for furnished holiday lets (FHLs) has been criticised by investors. However, this may not significantly discourage them from what remains a profitable investment.

Starting April 2025, FHL owners won’t be able to reduce their tax bill by offsetting costs like mortgage interest payments. The Chancellor aims to raise £300 million for other tax cuts and promote more long-term rentals in holiday hotspots.

Although disappointing for holiday let owners, existing landlords may still seek to diversify into holiday lets, along with expats.

According to Oliver, a holiday let makes more sense for expat investors buying property in the UK from overseas than a traditional buy-to-let. They enjoy regular income and a place to stay when visiting the UK.

To qualify as a holiday let, a property only needs to be available for rent for 210 days a year, offering ample opportunity for expats to use it for themselves the rest of the year.

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Why Could Holiday Lets Be a Good Investment in 2024?

Despite Jeremy Hunt’s recent Budget announcement, numerous tourist destinations continue to voice support for holiday lets due to their business opportunities and positive impact on the local economy.

Oliver believes holiday lets remain a good investment.

Since Covid, Brits have increasingly opted for staycations, causing a surge in demand for holiday rentals. The annual turnover for a UK holiday let rose to £24,000 in 2022 on average, up 59% from 2019, as per Sykes’ Holiday Letting Outlook Report 2023.

While long-term rentals may require less involvement from investors, holiday lets have the potential for higher returns, with added benefits of capital appreciation, particularly in prime locations.

On average, holiday lets owners invest £7,400 annually in their properties, excluding mortgage payments, according to Sykes’ report. However, choosing the right location can significantly increase rental income compared to a standard buy-to-let.

Even if rented for only 36 weeks a year, holiday lets can yield substantial returns. For instance, a four-bedroom holiday let in Cheshire in the North West, priced at £256,526, could generate £45,549 annually, according to Sykes’ report. Why not learn how to make money on buy to let property with our free guide.

Analysis by TaxWatch indicates that under the Furnished Holiday Let (FHL) regime, property owners earning £30,000 in rent can save £4,000 per year in income tax. While changes announced in the Budget may impact profits, holiday lets can offer attractive returns.

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