Costs of running a holiday let – our complete guide
You own a lovely home and it sits in an idyllic location, just perfect for holiday letting. You’ve thought about how many weeks a year you want to rent it out and have even considered how much to charge. But what about the costs of running a holiday let? Have you sat down and done the maths? And all of it?
Some costs like maintenance are obvious, while others, such as an annual gas certificate, are less so. But you need to factor all of them into your calculations to determine exactly how much it costs to run your holiday let. Only then will you have an accurate idea of what you need to charge to cover those costs and make a profit how do i price my holiday let And having all the figures will allow you to budget for the costs throughout the year.
To help you work out your exact costs, we’ve put together this guide, listing the obvious expenses and those that you might not have thought of.
The costs of setting up a holiday let
When it comes to successful holiday lets, not everything goes, and in fact, in today’s hugely competitive market, only the best goes. Guests have high expectations of both a property’s quality and condition and the facilities it provides. Your holiday let, therefore, needs to meet those exacting standards.
With this in mind, put yourself in your future guests’ shoes and take a long hard look at your holiday home. Note any aspect that doesn’t quite come up to scratch and set to work on improving it.
Did you know? Our local hosts are more than happy to offer advice on how to equip a holiday let. This support is just one of the benefits you enjoy when you let your property with Holiday Host.
Refurbishments
These range from minor renovations such as a fresh coat of paint and new floors to major undertakings such as adding another bedroom or a pool. The little things are usually essential, while the bigger jobs need some consideration. For example, will another bedroom or a pool allow you to make more money from letting? If the answer is no, cross that refurb off the list.
Fixtures and fitting
Kit your holiday home out with the best you can afford and wherever possible, go for the highest quality within your budget. Cheaper items are usually a false economy – for example, supermarket towels might last for just a season before they need replacing. On the other hand, Egyptian cotton ones could last for several.
Top tip
Take advantage of special deals, the sales and discounts offered by local firms. And don’t forget to keep all your receipts so that you can deduct the expenses from your pre-profit tax bill.
Running costs of a holiday let
Once you’re open for business, the everyday expenses kick in. They include the following:
Holiday home hosting services
Unless you’re going it alone (and even then, you’ll have to pay to list your property online), the costs of running a holiday let will include management of your property. You might opt for an entirely hands-off service with the whole process in the hands of a third party. Or go for a hybrid version where you are in charge of some aspects and others responsible for the rest. Expect to pay between 16 and 23% commission with most holiday management companies.
Did you know? Holiday Host charges just 12% commission (including VAT and OTA fees) on your holiday let earnings, allowing you to enjoy more of your profit. Our services include full support from our experts plus continual back-up from our local hosts.
Maintenance services
Factor in an amount every year for maintaining your holiday let in tiptop condition. It pays to be realistic because, as we all know, things do go wrong. For example, even new appliances break, storms and cold snaps play havoc with pipes and roofs, and all properties have quirky features that need fixing. Calculate a ballpark figure for this type of upkeep, say £500 a year.
Gardening services
Don’t forget your outside space either. Do you need a regular gardening service or just someone to pop round regularly to water the hanging baskets and mow the lawn? What about pressure washing the patio in the spring or sprucing up the garden furniture? Expect to pay from £15 an hour for a gardener.
Holiday let wear and tear
You also need to think about general wear and tear, suffered by all properties but especially by holiday lets. Include a budget for regularly touching up the paintwork and replacing items such as chipped crockery and frayed cushions. Depending on the size of the property and the care taken by guests, you may wish to set aside £100-£1000 a year for these considerations.
Holiday let changeovers & laundry
Your holiday let will need a thorough clean and laundry after each let. Work out the cost for each let – e.g. from £50 for a 4-hour clean and from £30 for laundry – and multiply it by the number of bookings you’re aiming to host. Include a deep clean at least once a year too.
Did you know? Our local hosts are more than happy to recommend reputable local services to maintain and clean your holiday let for you.
Discover our changeover service
Utility bills
Holiday let fees usually include the cost of electricity, gas, water, and broadband connections, so you’ll need to budget for all of them in your running costs. Install as many energy-efficiency measures as possible to keep your bills down and encourage guests to turn lights off and use water conscientiously. Shop around for the best deals and remember that you’ll be paying utility bills every month even if the property is unoccupied.
TV licence and streaming subscription
If you provide subscriptions to platforms such as Sky, Amazon, BritBox, Disney+, NOW TV, and/or Netflix, you’ll need to budget for these in your holiday let’s monthly running costs. And don’t forget the annual TV licence (£159 in 2022).
Holiday let insurance
A must-have in any holiday let, make sure your policy covers everything in and out of the property and includes third-party accident and public liability insurance. Talk to a specialist holiday home insurance provider for comprehensive cover.
Top tip
Ensure the insurance company is fully aware that you want cover for a holiday let, not just a second home.
Health and safety checks to budget for
These are also essential because you won’t be able to let your south west holiday let without them. Costs are usually annual and include:
- Gas safety certificate (CP12) – mandatory in any rental with a gas appliance in the UK. Budget for around £60 a year in a property with a gas boiler and cooker.
- Fire safety risk assessment – obligatory for any rental property to identify any fire hazards and reduce their risks. It’s best to have one every year. Inspections cost from £150.
- Electrical Safety Report Certificate – not compulsory but very advisable since you’re legally required to provide and maintain safe electrical installations and equipment at your holiday let. Expect to pay from £100 a year.
- Oil Safety Certificate and Services – if your holiday let uses oil, you need to comply with oil safety regulations. These include periodic services (usually every 12 months) of all oil-fired appliances. An Oil Safety Certificate is not a legal requirement, but, again, it’s a good idea to have the installations checked regularly. Budget for at least £75.
- PAT testing – Portable Appliance Testing is not a mandatory requirement, but it is good practice. You are required to provide electronic appliances in good working order. Confirming the electrical safety of these adds a layer of trust and reassurance for guests as well as peace of mind for you. Look to spend around £60 and to do this every few years or whenever adding new electrical appliances.
Discover the hidden costs of running a holiday let.
Did you know? You are responsible for the health and safety of all guests who stay at your holiday let. You should therefore carry out regular checks on the property.
Holiday let waste collection
Self-catering accommodation in England is classed as a producer of commercial waste, meaning you aren’t allowed to use regular council refuse collection services. Instead, you must contract and pay for a commercial waste collector. Read about commercial waste collection in Cornwall and in Devon. Annual costs vary on the size of your bin and how often it’s collected. Expect to pay from £500 a year for a holiday let sleeping four. If you don’t have space for a bin at the property, and you’re not already familiar with seagull sacks, you’ll need one of those too!
Top tip Little extras for guests
If you’re going the extra mile with your holiday let, provide a welcome pack for guests. Include basics such as tea, coffee and milk, and local produce like a bottle of cider, pot of clotted cream or farm eggs. Set yourself a maximum budget, say £20 per booking. This may vary depending on the finding a balance between how many guests your property caters for, the level of guest experience you aim to offer, and the profit margin you are targeting.
The cost of your time
How much do you charge an hour for anything you do towards your holiday let? While you won’t be sending yourself an invoice, do factor the time you expend into your costs.
If you’re expensive and/or spending too much of your own time on your holiday let, consider our HolidayHost services. You still enjoy a healthy proportion of the profits and stay in control of when you can stay at your property too (we put no limits on that). But our professionals take care of many aspects that can often be a hassle or a headache, so that you can free up some of your valuable time.
Holiday let tax considerations
Don’t forget this one! You may need an accountant to help you iron out the details but if you don’t factor in holiday let tax considerations at the beginning they could come to bite you further down the line.
Taxes on holiday lets
Now we know how much you can expect to spend on setting up and running a holiday let, what about tax? Bear in mind that HMRC regards self-catering accommodation as a business and as a result, there are some business tax obligations. And as with all tax matters, they’re rarely simple so take professional advice to manage yours.
Business tax
Holiday homes pay business rates rather than council tax and they’re based on the rateable value of your property. If it’s less than £12,000, you’re exempt from business tax. If it’s worth between £12,000 and £15,000, you may qualify for Small Business Rate Relief of up to 100%.
You can find out the rateable value of your property on the HMRC website.
Income tax
Holiday letting income forms part of your income tax. Depending on your earnings, your holiday let income should attract the same tax band as your regular income. When calculating your tax liability, don’t forget to apply all the available deductions.
VAT
If your holiday let turnover exceeds £85,000 in any 12 months, you must register for VAT and charge it at 20% on every booking.
Did you know?
You can track your holiday let bookings and earnings in real-time and 24/7 via the HolidayHost dashboard.
Final thoughts on holiday let running costs
Certainly, this list of the costs of running a holiday let is long. But don’t be put off and do include all of them. It literally pays to do your maths at the beginning so that you a) ensure you charge enough to cover your expenses and make a profit, and b) are fully aware of your monthly outgoings.
If you’d like advice on any of the above or on holiday lets generally, get in touch with our expert team. We’ll be only too happy to help you get your holiday let on track while you enjoy a bigger slice of the profits and staying in full control of your property.
