The ultimate guide to short term lets and holiday let insurance - Total Landlord Insurance

May 1, 2024
Total Landlord Insurance
The ultimate guide to short term lets and holiday let insurance - Total Landlord Insurance

For many landlords, short-term letting is a very worthwhile business. It can generate financial returns that are well above the buy to let average, while allowing flexibility in when and for how long a property is rented out. 


So, while some landlords choose to make their property available for short-term lets all year – for example, to corporate clients in a city or holidaymakers near the coast – others prefer to have a second home they can use themselves and then rent out as a holiday let the rest of the time.


The trend in short-term and holiday lets, particularly via sites such as Airbnb, Sykes and Cottages4You, has soared in recent years and especially since the COVID-19 pandemic. While foreign travel was limited, huge numbers of people discovered the benefits of holidaying in the UK and the demand for holiday homes has never been higher.


Analysis of government figures showed that in the first 18 months of the pandemic, more than 11,000 second home owners in England turned their properties into holiday lets. That translated to an increase of more than 20% in the number of holiday homes trading as businesses.


And the Sykes Holiday Letting Outlook Report 2023 revealed that in 2022 versus 2019, bookings for their UK holiday lets were up 48%, while the average annual turnover of a UK holiday let was 59% higher, at £24,000.


Meanwhile, AirDNA data shows that in April 2023, compared to the previous year, there was a 15% increase in listings, 17% more nights booked and a 1.5% rise in occupancy rates.


Although demand is strong and the potential returns are very good, as with the rest of the lettings sector there is a lot to know and do before you can legally and safely rent out a holiday let – even just for a couple of nights.


So, if you’re a landlord who’s decided that flexible short-term lets are the way forward, or if you’re about to dip your toes in the Airbnb water, then you’ll need to make sure that you’ve got all your ducks in a row. 


Our guide explains everything you need to know; from how to choose a property and get it ready for short-term letting, through to financing and insuring your short-term holiday let in the right way.

What is a buy to let holiday home?

A buy to let holiday home is a property that is fully furnished and rented out to holidaymakers on a short-term basis, which can be anything from a night or two to several weeks or more. Generally speaking, anything under six months is considered a short-term let.


This is an investment purchase and not your main home, although you may choose to use it as a second or holiday home yourself throughout the year. 


In terms of the holiday letting agreement for guests, there is no model government template, unlike with an Assured Shorthold Tenancy (AST). However, many holiday letting specialists and legal companies produce templates you can use for any let where the tenant is temporarily using the accommodation specifically for holiday purposes.


You can read all about short-term tenancy agreements in our separate guide.


As well as being fully furnished, holiday rentals should also be kitted out with everything a guest would reasonably expect to find in any home – see the section below on decorating and furnishing a holiday let.

Is a holiday let a good investment?

As with any property investment, you realise returns on holiday lets through rental profit and capital gains – but it’s the elevated rental returns that really attract investors.


What are the typical yields on a holiday let?

On average, a holiday let should generate an average eight to ten per cent return over the year – almost double the four to six per cent that standard buy to let properties do. 


And in peak holiday season, you could earn as much in a week from short-term letting as you could charge for a month on a longer rental agreement.


How profitable are holiday lets?

Good profit levels are a key reason why so many people choose to operate holiday lets, but just how much could you make?


While any furnished rental requires ongoing investment in maintenance, repairs, replacing items and administering changeovers, those costs are higher with holiday lets because of the sheer number of people moving in and out of the property.


So, although the rental income is usually higher for short-term lets, so is the amount you need to spend to keep the property up to standard. The question is, what is the difference between the two?


As a guide, recent research from Sykes estimates that holiday let owners invest an average of £7,400 a year in their properties. Of course, the amount will vary, depending on the property size, amenities and the number of lets and changeovers. But with an average turnover figure of £24,000 (Sykes), that still leaves an approximate average gross profit figure of more than £16,000 a year.


Pros and cons of short-term letting

The real benefit of short-term letting is that you can make significantly more profit from rental income than with longer-term rental agreements.


It also gives you flexibility around when you let the property, which allows you to use the property yourself at various points through the year if you want. 


And, unlike with a property let on an AST, it is generally much easier to get rid of any troublesome tenants!


However, it’s important to be aware of the additional potential risks and costs, which include:

  • The financial and time cost of organising and administering multiple changeovers in a month 
  • Greater wear and tear from having more different tenants, meaning more expenditure on maintenance and repairs 
  • Heating and utility bills are included in the rent, so some guests may run up bigger costs than others
  • Inconsistent income, as the number of lets and the amount of rent you can charge will vary through the year
  • More void days, when the property is standing empty between lets

Do you need a holiday let mortgage?

The type of mortgage you need will depend on exactly how you are planning to let the property.


But the most important thing to know is that if you currently have a standard residential mortgage and you’re going to rent out your property in any capacity, you must inform your lender. If you don’t, you will be in breach of your mortgage conditions and ultimately committing mortgage fraud. That could result in the lender demanding immediate repayment of the outstanding mortgage balance and may result in bad credit and more expensive borrowing in the future.


If you are just letting a small part of your home on an infrequent basis or when you’re on holiday yourself, a lender might allow you to keep your standard mortgage and simply increase the mortgage interest rate. They may also charge you a fee for arranging thisconsent to let’.


But if you intend to make money consistently throughout the year by letting the whole property or even an annexe, you will almost certainly have to apply for a buy to let mortgage that is specifically designed for short-term letting. 


Most buy to let mortgages are designed for properties that are rented out longer term, on an Assured Shorthold Tenancy agreement (AST). So it’s important to be clear with your broker or lender exactly how you intend to let your property – e.g. short-term corporate lets or as a holiday home – and how many days a year it will be available for let, in order that they can make sure you have the right type of mortgage loan.

What are the tax implications of running a holiday let?

The first thing to know is that you must inform HMRC if you intend to let a holiday home, as tax may be due on your rental income.


As the landlord of a furnished holiday let, specific tax rules apply, some of which are different from those that apply to long-term residential lets.


For instance, the rental income is classed as ‘trade’ and therefore must be reported separately from any other type of rental income on your self assessment return.


Another difference is that in the past you could claim holiday let relief, which includes:

  • Being able to deduct the full cost of mortgage interest from rental  income
  • Paying capital gains tax at a reduced rate of 10% when the property is sold, as long as you qualify for Business Asset Disposal Relief


However, in the 2024 Spring Budget, the Chancellor announced that this relief would be scrapped from 6 April 2025, so it’s worth speaking to a financial adviser or wealth manager to discuss the implications for you and your investment.


As long as your property qualifies as a Furnished Holiday Let (FHL), you can also offset business expenses against your revenue on your tax return, as with a long-term standard buy to let. It’s best to speak to a specialist property tax adviser to make sure you understand exactly what you can and can’t deduct. You can also find more information in our tax guide for landlords

How to make sure your property qualifies as a Furnished Holiday Let

In order for your property to be considered a FHL for tax purposes, it must be:

  • Furnished
  • Let with the intention of making a profit
  • Available to let for 210 days / 30 weeks in the first year, and
  • Be actually let as a holiday property for 105 days / 15 weeks
  • If the same guests occupy the property for more than 31 days, there must not be more than 155 days of these types of occupation in the year
  • Any days that you, your friends or family occupy the property for a free or discounted rate, do not count towards the minimum commercial occupancy requirements

If you file your tax return yourself, you may find it helpful to use this online tax calculator from Which?, working with GoSimpleTax. It lets you select your different sources of income – breaking it down clearly into categories including ‘Employment’, ‘Property’, ‘Furnished Holiday Lettings’ and ‘Rent a room’ - and then takes you through each one, step by step.

The tool is officially recognised by HMRC and has handy tips throughout that could alert you to allowances and expenses you may have overlooked.

And for more up-to-date information on all aspects of landlord taxation, visit our complete guide to UK landlord tax.

What type of holiday let should you buy?

The location and type of property you should buy for your holiday let will depend on how you plan to use it. 

If your main motivation is making money from letting year-round, then carry out some research online - on sites such as, and - to see what’s always in high demand. It’s also a good idea to speak to the local tourist office and any other local companies that offer holiday lets.

Location-wise, even if you’re planning to have someone else manage the rental for you, it’s still a good idea to buy within a couple of hours’ travel from your home, in case you need to get there to attend to any issues or carry out maintenance, or simply want to check on it yourself.

On the other hand, if you want something you can also use frequently yourself, then you’ll probably already have a location and type of property in mind. In that case, just make sure that there is good demand and check that you are happy with the amount of rent similar properties in the area are charging. If letting the property out on a regular basis is important, you may need to be prepared to compromise a little on your own wants and needs.

Current trends worth noting:

  • Data from AirDNA for 2023 shows demand for city centre holiday lets was still 30% below pre-pandemic levels, while rural and scenic destinations saw an increase in demand of between 15% and 25%
  • Sykes data shows that the best areas in the UK for holiday lets, in terms of return (as at April 2023), were:
    • England: Dorset, the Peak District and Northumberland
    • Wales: North Wales
    • Scotland: Highlands and Islands
  • According to travelnest, more than 50% of global searches are made by couples looking for romantic escapes
  • Research from Mintel found that 70% of people prioritise ‘things to do nearby’ when booking their holiday rental


Two important things to consider if you have a holiday home that you use yourself and also let out:

  • Don’t make the property décor and furnishings too personal to you – remember it needs to have a broad appeal to different guests 
  • If you want to keep personal possessions at the property, have a locked cupboard or secure outbuilding where you can store them while guests are staying

Setting up a holiday let

Once you have made sure you are able to let the property - i.e. you have the right mortgage and there are no lease or council restrictions - there are a number of different steps to setting up a holiday let so that it will attract guests and be safe and legally compliant. These include:

Information on all these follows below:

Do you need a licence to run a holiday let?

Currently, Scotland is the only country in the UK where you are required to have a licence before you can take bookings or receive guests.

In Wales, although a licence is not currently required, there are government proposals to establish a statutory registration and licensing scheme for all visitor accommodation.

In England, there are currently plans to introduce tighter controls for holiday lets – see below. Meanwhile, it’s important to know that each local authority has the power to introduce their own licensing and planning rules, so it’s essential to speak to them before moving ahead with any holiday let plans. 

Government proposals to control and monitor short-term lets in England

In February 2024, the Government announced that it intends to make changes to planning rules, giving local councils the ability to make short-term lets subject to the planning process. This is to help protect communities from being ‘hollowed out’.

The proposals also include the introduction of a mandatory national register of short-term lets, which will give local authorities valuable information and help make sure short-term and holiday accommodation complies with key health and safety regulations.

For more information, see the Government’s press release.

Holiday let rules and regulations for landlords

As the landlord of a holiday let, one of your most important legal responsibilities is to ensure the health and safety of your guests while they are in your property. That includes:

  • Carrying out a general risk assessment to identify any potential health and safety issues and risks in the property, detailing the steps you have taken to mitigate them
  • Complying with fire safety regulations (see below)
  • Having an annual gas safety check to make sure the system and appliances are safe, and securing a gas safety certificate
  • Making sure the electrical installation and appliances are safe, ideally by having a full electrical inspection at least once every five years and PAT testing appliances every year
  • In most cases, having an energy performance certificate (EPC), which should be renewed every 10 years

We would suggest that, as a responsible landlord, it’s well worth going over and above the minimum legal requirements for holiday lets, and making sure your property meets all the standards required of a traditional long-term rental. See our dedicated guide: Legislation for landlords: Everything you need to know.

Fire safety rules for holiday lets

Holiday home owners are subject to the same fire safety rules as landlords of ‘standard’ rented properties. These include (for England and Wales):

  • Carrying out a fire risk assessment – ideally, have a qualified fire safety professional carry this out for you, at least the first time, and make sure it is updated every one to two years
  • Installing a smoke alarm on each floor and a carbon monoxide (CO) detector in any room that has a solid fuel-burning appliance
  • Checking all furnishings meet fire safety standards

For full information, see our ultimate guide to fire safety regulations for landlords.

What are the council tax rules for holiday lets?

If your property is in England, speak to your local council to find out the council tax rules and rates in your area.

However, if your property is available for short-term lets for more than 140 days a year and is actually let for more than 70 days, it is subject to business rates tax, rather than council tax. 

You may qualify for Small Business Rate Relief, which could be up to 100%, depending on the rateable value of the property. To qualify for this relief in Wales, the property must be available for at least 252 days a year and actually rented for at least 182 days. 

Furnishing a holiday let

As with any rental property, it’s important to identify your main target market and decorate and furnish with them in mind.

For instance, if you’re offering pet-friendly accommodation, consider solid floors, washable throws for sofas and chairs and provide good drying facilities for wet blankets etc. And if you’re trying to attract families, keep sharp edges to a minimum, have lots of comfortable seating and make sure there’s a decent dining table and a high-chair available.

On the other hand, if you’re more in the ‘romantic getaway’ market, you can aim for a more luxurious and elegant feel.

Cheap furniture is likely to need replacing much more quickly than if you spend a little more, so it’s worth investing in decent quality pieces that will help guests feel that they’re getting value for money. 

Importantly, the beds must be comfortable, and you must make sure there is sufficient seating in the living room for all guests to relax. 

In terms of heating the property, a wood-burning stove is a very attractive feature for guests and should be less expensive to run than central heating. 

According to the Sykes Holiday Letting Outlook Report 2023, the three features of a holiday home that generate the most additional income are:

  • Hot tubs: +37%
  • Accepting pets: +31%
  • WiFi: +26%

While you might not want to invest in a hot tub, having a pet-friendly holiday home and making sure there is a good WiFi connection require very little additional outlay.

When it comes to the other contents of the home, landlords should provide:

  • Crockery, glassware and cutlery
  • Cooking and baking equipment and utensils
  • Kettle, toaster, microwave
  • Iron, ironing board and vacuum cleaner
  • Towels and bed linen
  • Cleaning products, spare lightbulbs, etc.

Note: If you provide a television, you will need a specific Hotel and Mobile Televisions Licence.

And it’s worth making an extra effort to make sure your guests feel welcome. Not only is it helpful to encourage repeat bookings, but with every holiday rental site and operator having feedback facilities, you want to ensure a good rating and review.

The best holiday homes provide:

  • A comprehensive welcome pack, with guides on how to use all the equipment and facilities in the property, as well as local restaurants, sights and things to do nearby, taxi companies, etc.
  • A coffee machine with a ‘starter pack’ of pods
  • A ‘welcome basket’ in the kitchen, with things like bread, eggs, local jam and a bottle of wine
  • Some butter and milk in the fridge
  • Toilet rolls
  • Some fresh flowers, as well as a few hardy plants around the home
  • Some fuel, if there is a log burner or open fire
  • A small library of books and DVDs (note: you are likely to need a DVD concierge licence for this)

Finally, it’s worth displaying ‘house rules’ – the kitchen is usually a good place. These are polite reminders to your guests of things that will help make sure the property stays in good condition, such as:

  • Taking off muddy shoes at the door
  • Making sure rubbish and recycling is disposed of correctly 
  • Only smoking outside 

Advertising a holiday let

How a property is presented and ‘sold’ in marketing and advertising is especially important for holiday lets. 

When people are spending valuable holiday time and money on a break from their normal routine, they want somewhere special, where they can relax and enjoy their break.

That means not only do you have to provide everything they could want and need on their holiday, but you have to sell the ‘perfect getaway’ through your property photographs and description:

  • Have clear photographs of every room from a couple of different angles – and set up the rooms exactly as they will be when guests arrive, with clean bedding, fresh flowers, lamps on, etc. 
  • If there are views, show them – both through the window from inside and outside
  • Take shots of the outside in daylight and in the evening – twilight shots with interior lights on can look particularly attractive
  • Have pictures of local sights
  • Have a bullet-point list of all the key benefits and facilities, as well as key local attractions

Some of the top sites to advertise your property on are:,, and But if your property caters to a niche audience, such as those with large dogs or who require wheelchair access, it’s also worth advertising on specialist sites. 

Managing a holiday let

Managing a holiday let can be very time-consuming, which is why many landlords choose to outsource it to professional experts (see next section).

On the other hand, if you have the time and live close by, you may find handling the management yourself financially beneficial and a rewarding part-time job.

The key tasks include:

  • Ongoing marketing
  • Taking bookings 
  • Arranging check-ins and check-outs
  • Cleaning between lets and preparing the property for the next guest
  • Keeping on top of maintenance and repairs – making sure everything is working properly before each new let

For more information and advice on successfully managing any rental property, see our ultimate landlord’s guide to rental property management.

Choosing a holiday letting agent

Because of the heavy letting and management demands that come with holiday lets, many landlords choose to use an agent to handle some, if not all the work for them.

Needless to say, the most well-known agents will have the biggest advertising reach, but you also need to consider the level of service you want. For instance, if you’re looking for an agent that can handle changeovers, check-ins and guest liaison on your behalf, it’s important that they have local experts who are knowledgeable about the area.

Tips on choosing an agent:

  • Look online yourself and see which agents’ listings most appeal to you – how do you want your property to be marketed?
  • What do online reviews on sites like Trustpilot say about them? 
  • Do they have a lot of similar properties in your area and are they all letting well?
  • Speak to them on the phone to see for yourself how they deal with enquiries
  • Meet them for an in-person rental valuation of your property 

Before signing up with any agent, make sure you know exactly what their fee structure is and what notice you have to give if you want to terminate their services.

How much do holiday let management agencies cost?

There are three types of fees agents tend to charge:

  • A commission rate - generally somewhere between 20% and 50%, depending on the level of service
  • A one-off setup fee for helping to get your holiday let up and running, including advertising - usually somewhere between £100 and £250
  • An annual fee for maintaining your property’s listing – around £100

Insurance for short term lets and holiday homes

Whether you’re managing short-term lets and holiday lets yourself or using a third party’s comprehensive services, such as those offered by Airbnb, you must make sure you have a dedicated specialist short-term let insurance policy that fully protects you.

Here are some common questions about short-term let insurance:

Are short term lets and holiday homes covered by my existing insurance?

Don’t assume that the insurance you already have will cover you. Contact your insurance company to find out, as you may need to find a dedicated insurer if they can’t help you. Without the right kind of cover any future claim would be invalidated, leaving you out of pocket. Whether your home is used purely by your family and friends, or you let it out for short-term holidays, Total Landlord’s holiday home insurance could provide comprehensive cover for up to 10 paying guests, including accidental and malicious damage if required (cover is subject to our standard acceptance criteria).

What about my granny annexe?

A granny annexe may be attached to your house but you’ll still need specialist insurance if you’re going to rent it out.

Does my insurance already cover Airbnb home rental?

Standard home and most landlord insurance won’t give you the cover you need for letting a property via Airbnb, so you will need a specialist policy.

Doesn’t Airbnb insure you for free?

We’re often asked about both Airbnb host guarantee and Airbnb protection insurance. What are they, and do they cover you for every possibility? Here’s an explanation:

Airbnb host guarantee

Airbnb automatically provides a ‘host guarantee’ but this is neither an insurance policy nor a replacement for short term let insurance. It’s a property damage protection programme with limitations, providing cover of around £700,000 (though it’s not clear if this is per property or for every property worldwide).

What if I need to make an Airbnb host guarantee claim?

In the first instance you’ll need to make a claim against your guest via your existing host insurance before submitting a claim to Airbnb. Any successful insurance claim will be deducted from the host guarantee, so it’s not something you should rely on.

Airbnb host protection insurance

Airbnb also automatically provide ‘host protection insurance’ providing cover of around £700,000. It’s public liability insurance, so covers you if a guest gets hurt or if their belongings are damaged within your property during their stay. Beware that it does not cover all liability types.

What is not covered within Airbnb host protection insurance?

  • Assault within the property
  • Loss of income
  • Damage to the host’s property or belongings

What if a burglar assaulted one of your guests?

If this happened, the guest could sue you. You would be liable for legal expenses, and if you were proven to be at fault due to the security of the property, then you’d also have to cover injury claims, which could total hundreds of thousands of pounds. This wouldn’t be covered by Airbnb host protection.

Do I need specialist cover as well as ‘Airbnb insurance’?

As you can see, there are gaps in the Airbnb guarantee and host protection insurance which you need to fill in order to protect yourself and avoid financial risk. As not all property damage caused by guests or types of liability will fall within their terms, it’s vital for owners to take out a holiday home insurance policy that provides comprehensive host insurance for short term rental, holiday or Airbnb agreements.

What would specialist holiday home/short term let insurance cover?

Total Landlord provides a dedicated policy for Airbnb, short-term and holiday lets. Here are just a few examples of what would be covered:

Hamilton Fraser sofa icon

Accidental damage

Wine is spilt on your sofa or an expensive granite worktop in your kitchen is damaged accidentally. Available for an additional premium.

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A careless guest accidentally sets fire to your holiday home, short term let or Airbnb.

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Theft by guests

For an additional premium of just £35 you can cover yourself for up to £5,000 in the event of a guest deciding to help themselves to your expensive TV, garden furniture or audio equipment or any other expensive items provided in the property for the luxury of your guests.*

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Malicious damage by guests

The £35 additional premium also covers you if you are unfortunate enough to have some undesirable guests who decide to trash your property before they leave or throw a party where their mates decide it would be fun to slash the sofa, pour red wine over your carpet or put their foot through your glass patio doors.*

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A guest falls and hurts themselves in your property due to a fault with the equipment/furniture you have supplied, such as a chair collapsing or the guest tripping over some loose carpet. Another example would be where a guest injures themselves on a faulty electrical appliance.

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A storm damages your roof, so your guests have to be relocated.

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Loss of rent

If your property is uninhabitable following an insured event, we provide loss of rent up to 20 per cent of the sum insured.

* This would be covered for a short-term holiday let but not for an Airbnb let.

We can offer a tailored UK holiday home insurance policy that can provide comprehensive cover for short term lets (with a minimum premium of only £115 pa), and for an additional £35, include cover for £5,000 of malicious damage cover or theft by a paying guest, something which isn’t offered by the majority of insurance providers.

And if you’re an existing Total Landlord, Hamilton Fraser or Landlord Action customer, or a Property Redress Scheme member, you can receive a premium discount.


Short term and holiday lets are a specialist cover that you are less likely to see on comparison sites and at Total Landlord Insurance we have a dedicated team that can discuss your individual circumstances and look to offer you a policy that meets your needs. For more information give them a call on 0345310 6336.

The higher level of cover provided by specialist insurance for your short term let or Airbnb will mitigate your risks and give you the peace of mind that you are prepared, whatever might happen.

Holiday let insurance for short-term rental properties FAQs

Why is holiday home insurance important?

If you rent out a property on a short-term or holiday let and you only have a standard homeowner’s insurance policy, you may not be covered in the event of needing to make a claim.

Holiday home insurance can make sure you are covered financially if the property is accidentally or deliberately damaged while being marketed or let.

What insurance do you need for a short-term let?

For any short-term let, you will need specialist, tailored insurance that takes into account the particular risks associated with this type of rental.

Standard homeowner’s insurance and even buy to let landlord’s insurance policies may not pay out in the event of a claim if a property is being let on a short-term basis.

What does holiday let insurance cover?

Our own tailored holiday home insurance policy can cover:

  • Accidental damage (for an additional premium)
  • Fire and storm damage
  • Theft or malicious damage by guests, up to £5,000 (for an additional premium but excluding Airbnb rentals)
  • Liability – in case a guest injures themselves in your property and pursues you for damages
  • Loss of rent if the property is uninhabitable following an insured event

Do I need public liability insurance for a holiday let?

If a guest injures themselves in your holiday home or their personal property is damaged and they pursue you in court, that could prove very costly.

So, while having public liability insurance is not a legal requirement, it is certainly advisable, and if you market your property through an online platform or agency, they may require you to have a minimum level of cover.

How much is holiday let insurance?

Premium rates will vary, depending on the level of cover required. 

Our own comprehensive policy for short-term lets starts at £115 per annum (£150 to include £5,000 of cover for theft or malicious damage by guests).

You can get a tailored quote online via our website.

What if my short term let is unoccupied?

If your rental property is unoccupied for 30 days or more, you must inform your insurer, as you may require unoccupied property insurance. 

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