Holiday let tax: what hosts get wrong and what to do instead
What I learnt from holiday let tax expert, Helen.
I recently sat down with Helen from Maple Tree Tax and Accounting to talk through some of the most common tax mistakes holiday let hosts make, the things people often miss, and the changes that are coming with Making Tax Digital. Helen is not just a tax accountant. She is also a holiday let owner, which means she understands both the rules and the reality of running this kind of business.
Tax is one of those parts of running a holiday let that most people know matters, but very few feel confident about. It makes sense, you likely didn’t start a holiday let business because you were desperate to spend time thinking about allowable expenses, digital record keeping, thresholds, or whether you are accidentally claiming something you shouldn’t be. Getting tax wrong can be expensive. It can cost you money, create stress, and leave you untangling problems much later when things are harder to fix.
Capital and revenue are not the same thing
One of the biggest areas of confusion for holiday let hosts is the difference between capital expenditure and revenue expenditure. In simple terms, revenue expenditure is usually the day-to-day cost of running your holiday let business whereas capital expenditure is usually money spent buying, improving, or setting up more substantial parts of it.
So your electricity, cleaning, laundry, maintenance, rubbish collection, advertising, mileage for housekeeping or maintenance trips, training, and many accountancy-related costs will usually fall into the revenue category. Your property purchase, your initial set-up spend, and any larger improvements will usually be capital.
That distinction is important because the tax treatment is different, and this is one of the places many hosts get things wrong without realising, which is why working with a knowledgeable accountant is crucial. A good accountant is not just there to file a return, they should also be able to spot what you have missed, what you have misunderstood, and where you may be overclaiming or underclaiming. Iyou are paying for expert help, that is part of the value.
What holiday let expenses can you claim?
This is one of the most common questions hosts ask, and understandably so. In broad terms, allowable holiday let expenses are usually the ongoing costs of running the business. That may include cleaning, laundry, utilities, council tax or business rates where relevant, rubbish collection, consumables, maintenance, advertising, agent fees, software, training, and mileage for business-related trips.
The key point is that these need to be genuine business expenses. They need to relate to running the holiday let, and they need to be recorded clearly and consistently.
This is where good bookkeeping is key. It isn’t the most enjoyable of tasks I know, but vague records can create expensive problems and make it much harder for an accountant to help you properly.
You cannot claim for your own time
Now, this is one that comes up time and time again in host groups. Someone does their own cleaning or laundry and thinks, “A cleaner would have charged £40 for this, so I’ll just put £40 through as an expense.” You cannot do that.
You can claim the cost of the washing powder, cleaning products, electricity, and mileage if you are travelling for a legitimate business reason but you cannot create an expense for your own labour, unless that income is genuinely being paid and properly declared elsewhere.
That is the bit people often miss. If nobody is paying tax on that amount, it is not a legitimate business deduction. Once you see it clearly, it is obvious but plenty of hosts have just never had it explained to them in those simple terms.
Do you declare income before or after Airbnb and agent fees?
This one also catches a lot of people out, especially those using agents or platforms.
Many hosts assume that they only need to declare the amount that lands in their bank account after fees have been taken off. In many cases, that is not the right way to think about it.
Broadly speaking, you need to look at the income the guest paid for the stay, with relevant fees then treated separately. That distinction is especially important if you are close to any reporting threshold, because understating turnover can create a bigger problem than you may think.
With Airbnb, the exact position can depend on whether you are using split fees or a host-only fee structure. That is one of the reasons hosts near thresholds, especially VAT or Making Tax Digital thresholds, should not rely on guesswork (or Facebook comments.)
From April 2026, Making Tax Digital for Income Tax became mandatory for sole traders and landlords with a qualifying income over £50,000, based on the 2024 to 2025 tax year. From April 2027 this will extend to those with qualifying income over £30,000.
The government has set out plans to reduce the threshold to over £20,000 from April 2028. Qualifying income is based on gross income from self-employment and property, not profit so accuracy matters more than ever.
Holiday swaps are not invisible for tax purposes
Holiday swaps sound lovely in theory, and sometimes in practice too but from a tax point of view, they are not simply “free”.
If you exchange stays with another host, there may still be a taxable value attached to what you have received. In other words, the fact that no money changed hands does not automatically mean nothing needs to be declared.
This is a good example of where host logic and tax logic are not the same thing. Something can feel informal and still have tax consequences.
Why good records matter far more than you think
Keeping clear records is not just about getting through tax return season with less swearing.
One of the biggest problems accountants see is hosts not keeping a clear record of what was revenue expenditure, what was capital expenditure, and what has already been claimed. Years later, when they need to look back at the history of the property, or work out what has and has not already had tax relief, things become murky very quickly.
I promise this is not me trying to make bookkeeping sound glamorous. It is not glamorous. It is simply useful. The hosts who keep tidy records usually make life easier for themselves in every direction.
Making Tax Digital for landlords and holiday let hosts
Making Tax Digital is one of the biggest practical changes now affecting hosts with property income.
As mentioned above, from 6th April 2026, landlords and sole traders with qualifying income over £50,000 must use compatible software to keep digital records and send quarterly updates to HMRC. From 6th April 2027, that extends to those over £30,000, and there are plans to bring in those over £20,000 from 6th April 2028.
HMRC states that you or your agent will need software that works with Making Tax Digital for Income Tax to create and store digital records, send quarterly updates, and submit the final return.
For plenty of hosts, this will feel like a nuisance at first. But there is another way to look at it.
If you currently leave your books for months, then have a horrible catch-up session with receipts, statements, and a growing sense of doom, this may actually improve your systems. Monthly record keeping is easier, more accurate, and far less stressful than trying to reconstruct everything later.
So even if you are not in the first wave, it would be sensible to get into better habits now.
You can read more about Making Tax Digital on the GOV.UKwebsite.
What software should holiday let hosts use for Making Tax Digital?
The right answer is usually the one you will actually use consistently.
If you are already happy with spreadsheets and your accountant can work from them efficiently, that may still be workable with bridging software or accountant support. If you want something more automated, software options that support Making Tax Digital may be a better fit.
The main thing is not choosing the perfect system. It is choosing one that works for you. A mediocre system used monthly is far better than a beautiful system you avoid for four months at a time.
What changed with furnished holiday lettings tax?
This is the bit where older advice can now be actively confusing.
The furnished holiday lettings tax regime has been abolished from April 2025. HMRC states that the furnished holiday lettings rules ceased to apply from 6th April 2025 for Income Tax and Capital Gains Tax, and from 1st April 2025 for Corporation Tax. Holiday lets are now broadly treated the same as other property income businesses for those purposes.
That means if you are reading old posts, old forum comments, or even older accountancy content, you really need to be careful. Some of it may have been right at the time but is wrong now.
It also means that if your understanding of holiday let tax is still built around the old furnished holiday lettings rules, it maybe worth spending some time researching and refreshing your knowledge.
Do capital allowances still matter?
Sometimes, yes but this is an area where you need proper, current advice rather than general chat online.
Because the furnished holiday lettings regime has ended, the rules are not the same going forward. But there can still be historic positions, earlier qualifying periods, and transitional consequences that matter. HMRC’s helpsheet for furnished holiday lettings in 2025 notes that when a property stops being a qualifying furnished holiday letting, you may need to work out balancing allowances or balancing charges for capital allowances.
So the lazy answer is “that’s all gone now”. The more accurate answer is “the regime has ended, but historic claims and transitional treatment can still matter, so check your own position carefully”.
Three things worth doing now
Check whether Making Tax Digital is likely to apply to you, and check it using gross income rather than profit.
If your records are not currently updated monthly, fix that. This is probably the simplest high-impact improvement you can make.
If you are unsure on agent fee treatment, allowable expenses, capital allowances, or how the post-2025 tax changes affect you, speak to a specialist rather than relying on half-remembered advice.
Tax is one of those areas where being “sort of right” just won’t cut it.
What next?
Tax is important, so it is absolutely worth investing in professional help to ensure everything is correct. I can highly recommend Helen from Maple Tree Tax and Accounting. Click below to access her website, and don’t forget to use the code KAY5 for a discount.
🎙️If you’d like to hear more incredibly helpful tips on tax spefically for Holiday Let Hosts, be sure to listen to the podcast episode with Helen in full. Click the link for your chosen platform below to find the episode.
Fancy a freebie?
My step 1 guide is completely free and, if you’re thinking about holiday letting, Airbnb or buying a holiday cottage in the UK, it is designed to stop you making the classic early mistakes when setting up your holiday let. You can access it now here:
A quick note
I have an affiliate relationship with Helen, which means I may receive a referral fee if you choose to work with her and use my code. I only ever recommend services I personally use and trust, and Helen is someone I have worked with myself.