Serviced accommodation looks like a holiday let but is taxed more like a small hotel. The holiday let tax rules changed in April 2025, and a lot of operators are still working to the old ones. This guide explains the rules that apply now, in plain English.
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What changed in April 2025
Before April 2025, many serviced accommodation units counted as “furnished holiday lets”. That status came with tax perks: full relief on mortgage interest, tax relief on furniture, and a lower tax rate when you sold.
Those perks have gone. Serviced accommodation is now taxed like any other rental property:
- Mortgage interest: if you own the property in your own name, you get a 20% tax credit on the interest instead of deducting it in full. This is the Section 24 rule that applies to all landlords.
- Furniture: no tax relief on the first set of furniture. Replacing items later can still be claimed.
- Selling: no special lower rate. A gain is taxed at the normal 18% or 24% if you own it personally.
Personal name or limited company: the mortgage interest difference
The 20% cap on mortgage interest only applies if you own the property in your own name. If a limited company owns it, Section 24 doesn’t apply. The company deducts all of its mortgage interest from its profit before working out its tax.
The same goes for selling. A company doesn’t pay capital gains tax. The gain is added to the company’s profit and taxed as part of its corporation tax.
That doesn’t make a company the right answer for everyone. Moving an existing property into a company can trigger stamp duty and capital gains tax. But if you’re buying serviced accommodation with a mortgage, compare both options before you buy.
VAT: the rule that catches serviced accommodation
This is the big one. Rent from a normal buy-to-let has no VAT. Short-stay accommodation is different. It’s treated like a hotel, so VAT at 20% applies once you’re registered.
You must register for VAT once your sales go over £90,000 in any 12-month period. Serviced accommodation reaches that figure much faster than a buy-to-let, because nightly rates are far higher than monthly rent. Two or three busy units can be enough.
Once registered, one-sixth of everything a guest pays goes to HMRC. A £120 night becomes £100 for you and £20 for HMRC. So build VAT into your prices from the start, whether that’s your nightly rate or your dynamic pricing settings. If you set prices without VAT and then have to register, your profit drops overnight.
Getting close to £90,000? Book a free call and we’ll plan your VAT before you cross the line.
Example: letting rooms in your own home as well
Take an operator who runs several serviced apartments through a VAT-registered business, listed on Airbnb under the business account. She also has two spare rooms in her own home that she wants to let to guests.
If she lets those rooms on their own, rent-a-room relief can make up to £7,500 a year tax-free, and no VAT applies.
If she lists them on the same business Airbnb account, using the same booking systems and the same cleaners, HMRC can treat them as part of the VAT-registered business. Then VAT is due on that income too, and the rent-a-room relief may be lost.
The answer is to keep the home rooms completely separate: a separate personal listing, separate bookings and separate money. Decide how to set this up before you list a single room, because it’s hard to undo afterwards. Check the setup with your accountant before you start, to make sure it stands up with HMRC.
Council tax or business rates?
In England, if your unit is available to let for at least 140 days a year and is actually let for at least 70 days, it pays business rates instead of council tax. Small units can often get small business rates relief, which can bring the bill down to nothing. In Wales the figures are higher: available for 252 days and let for 182.
Monthly bookkeeping that pays for itself
Serviced accommodation is busy: lots of guests, cleaners, platform fees and agent statements. Check each agent or platform statement every month, with the full booking amount, fees and deductions on separate lines, matched to your bank. Do it monthly and a mistake shows up within weeks, while it’s easy to fix. Leave it to the year end and it may surface 18 months later. We once caught an easy-to-miss £1,066 error in an agent’s statement this way. It paid for the client’s bookkeeping for the year.
Want this handled for you? See how we work as an accountant for property investors.
Frequently asked questions
Do I have to charge VAT on serviced accommodation?
Once your sales go over £90,000 in any 12 months, yes. Short-stay accommodation is treated like a hotel, so VAT applies, unlike rent from a normal buy-to-let.
Is serviced accommodation still a furnished holiday let?
No. The furnished holiday let rules ended in April 2025. Serviced accommodation is now taxed like other rental property, although VAT and business rates still make it different from a buy-to-let.
Does Section 24 apply if my serviced accommodation is in a limited company?
No. Section 24 only applies to properties owned personally. A limited company deducts all of its mortgage interest from its profit.
Can I get tax relief on furniture for serviced accommodation?
Not on the first set of furniture. Since April 2025 there are no capital allowances on new furniture, so furnishing a unit for the first time gets no tax relief. When you replace an item like-for-like, such as a bed, sofa or fridge, the replacement can be claimed in full. This applies whether you own the property personally or through a limited company. If you were already claiming capital allowances on furniture before April 2025, you can keep claiming on that existing amount.
Do I pay council tax or business rates?
In England, if the unit is available to let for at least 140 days a year and actually let for at least 70, it pays business rates. Small business rates relief may then reduce the bill.
Run serviced accommodation? Book a free call and we’ll get your VAT, business rates and monthly books right.
Related reading: Holiday let tax after the FHL rules ended · Section 24 explained · Limited company or personal name
