Recent research carried out in May 2026 reveals that the British holiday-let sector is faring better than many analysts expected after the government scrapped the long-standing Furnished Holiday Let (FHL) tax relief. The study, known as the Holiday Let Index, surveyed 125 participants – 25 mortgage brokers, 50 private landlords and 50 homeowners – to gauge how the policy shift has influenced profitability.
Profitability after the tax overhaul
According to the index, 48% of owners said their earnings have risen since the tax change, while a further 19% reported stable profits. In practical terms, this means that more than two-thirds of respondents are either better off or at least not worse off despite losing a valuable tax advantage.
The data also highlights that 86% of owners are achieving gross rental yields of 5% or higher. Breaking that down, 44% sit in the 5-6% band, 34% enjoy yields of 7-8%, and another 8% have pushed their returns into the 9-10% range. These figures suggest that many investors are successfully offsetting higher tax liabilities through smarter operational tactics.
Strategic adjustments driving the upside
Owners are not merely relying on market demand; they are actively reshaping their business models. The index shows that 47% of respondents have increased nightly rates while 46% are focusing on boosting occupancy. This dual approach reflects a calculated balance between price optimisation and volume maximisation.
Guest behaviour has also evolved. Half of the owners (50%) reported a surge in last-minute bookings and 39% noted that stays are becoming shorter. The same 39% observed that guests are more price-sensitive prompting landlords to fine-tune their pricing strategies and promotional offers.
Grant Seaton, head of intermediary lending at Cumberland Building Society, summed up the trend: “Owners are having to work for their returns. They are looking much more closely at pricing, occupancy, finance costs and how each property is run, rather than assuming demand alone will produce a good result.” He added that a strong gross yield does not automatically translate into a robust business because factors such as seasonality, management fees, maintenance and borrowing costs can dramatically alter the
Future outlook and expansion plans
Optimism remains prevalent. A full 61% of owners expressed confidence in future yields and the appetite for growth is evident – 30% intend to purchase another holiday let within the next twelve months, and 25% plan to expand their existing portfolios. These intentions underline a belief that the market can sustain, and perhaps even improve, its performance despite the regulatory headwinds.
The index also flags the importance of financial discipline. Seaton warned brokers to move beyond simply asking about potential rent levels, urging them to assess the sustainability of income, the underlying cost structure and the borrower’s ability to weather periods of weaker performance.
New visitor levy adds a fresh layer of complexity
While owners celebrate higher profits, a separate policy development threatens to add pressure. Regional mayors in England have been granted the power to impose an unlimited overnight visitor levy on stays in hotels, B&Bs and holiday lets. Critics argue that the levy is a “slap in the face” for an industry already grappling with rising energy, insurance and food costs.
Industry voices, including hotel operators and tourism bodies, warn that the levy could erode competitiveness. They point to examples from Europe – such as Venice and Barcelona – where tourism taxes have failed to deliver noticeable improvements in infrastructure while burdening local businesses.
Anthony Duffey, owner of a coastal B&B, summed up the sentiment: “The proposed levy feels like another burden at a time when many small businesses are already finding things tough. It could push owners to look abroad for more attractive returns, further weakening the domestic tourism sector.”
Professional organisations echo these concerns, noting that a patchwork of locally-set levies could create a fragmented market, making the UK less appealing to international visitors and investors alike. They call for transparent reinvestment of any collected revenue into tourism-related infrastructure to justify the additional cost.
In essence, the holiday-let market is navigating a delicate balance: leveraging strategic price and occupancy tweaks to offset lost tax relief, while monitoring the potential impact of new visitor charges that could reshape the profitability equation.
For owners, brokers and policymakers alike, the key takeaway is clear – success will depend on a rigorous understanding of the numbers behind each property and the agility to adapt when fiscal or regulatory conditions shift.
