Do holiday let owners need to register for VAT

Yes, once their taxable turnover goes over the VAT registration threshold, which is £90,000 for 2026 to 2027. Holiday letting is standard rated rather than exempt, so every pound of letting income counts towards the threshold, and the test looks at the owner as a person, so all the lets and other businesses that person runs are added together.

Tax investigation insurance from £108.75 a year (£9.06 a month).Pays up to £100,000 of your accountant's fees if HMRC opens an enquiry. No excess. Buy online in a few minutes.

See my price in 2 questions How the cover works Accountant? Offer cover to your clients or call 01795 841 310

Why does holiday letting income count towards the threshold?

Most income from letting a home is exempt from VAT under Item 1 of Group 1 of Schedule 9 to the Value Added Tax Act 1994. Paragraph (e) of that item takes the grant of any interest in, or licence to occupy, holiday accommodation out of the exemption. Note 13 defines holiday accommodation as accommodation in a building, hut, beach hut, chalet, caravan, houseboat or tent that is advertised or held out as holiday accommodation or as suitable for holiday or leisure use. A cottage listed on a booking platform is caught by that definition whatever the length of each stay.

Because the supply is taxable rather than exempt, it counts in full towards taxable turnover. GOV.UK defines taxable turnover as the total value of everything you sell that is not VAT exempt or out of scope. A landlord with £95,000 of long term residential rent has no registration issue, because that rent is exempt. A holiday let owner with the same income has passed the threshold.

There is one useful carve out. VAT Notice 709/3, paragraph 5.6, says that holiday accommodation let out of season as residential accommodation for more than 28 days is exempt, including the first 28 days, provided holiday trade in the area is clearly seasonal. HMRC treats the season as normally running from Easter to the end of September, and does not regard places such as London and Edinburgh as seasonal. Exempt winter lets of this kind do not count towards the threshold, but you need a tenancy agreement or similar evidence that the occupation was residential. The wider rules on standard rating and long stays are covered in holiday accommodation and VAT.

How is the £90,000 test applied?

There are two tests, both on GOV.UK. You must register if your taxable turnover for the last 12 months goes over £90,000, or if you expect it to go over £90,000 in the next 30 days alone. The backward test is a rolling one: at the end of every month you add up the previous 12 months. If you go over, you must register within 30 days of the end of that month, and your registration takes effect from the first day of the second month after you went over.

Turnover is measured excluding VAT (VATREG02300, applying section 19 of the 1994 Act). For a holiday let it includes everything you charge guests for the stay: nightly or weekly rent, cleaning fees, linen charges and booking fees you charge yourself. Notice 709/3 paragraphs 7.1 and 7.4 treat deposits and booking fees as advance payments, so a deposit you keep when a guest cancels is still taxable income.

The threshold is not affected by the end of the furnished holiday lettings regime. HMRC’s clarification on the abolition says the current VAT rules are not changing and holiday accommodation is still standard rated, whether or not it previously qualified as a furnished holiday let. See the abolition of furnished holiday lettings for the income tax side.

Worried about an HMRC check? Tax investigation insurance pays your accountant’s fees if HMRC opens an enquiry or compliance check. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties.

From £108.75 a year (£9.06 a month) for individuals, £117.57 for sole traders and £207.50 for companies and partnerships, including IPT and the £20 admin fee.

See my price in 2 questions or call 01795 841 310.

★★★★★ Rated 4.9 out of 5 on Trustpilot from over 160 reviews

How are owners with several lets treated?

VAT registers the person, not the property or the business. VATREG02200 states that it is the person rather than the business which is registered, so a trader must take into account all their business activities, a principle confirmed in Customs and Excise Commissioners v Glassborow (1974). An owner with three cottages in their own name adds the income from all three. If the same person also runs a consultancy, a shop or any other taxable business as a sole trader, that turnover is added too. The point is developed in one VAT registration for sole traders.

A different person is tested separately:

A partnership. VATREG08750 explains that section 45 of the 1994 Act treats partners as one person for VAT, so A trading alone is a different person from A trading in partnership with B, and a partnership of A, B and C is different from one of A, B and D. Lets run by a husband and wife partnership are therefore tested apart from a cottage one of them lets alone.
A company. VATREG02100 lists corporate bodies as legal persons, separate and distinct from their members, so a holiday let company has its own threshold.

Whether joint owners are actually in partnership is a question of fact. Owning property together does not of itself create one; see whether joint letting is a partnership.

Can lets be split between family members to stay under the threshold?

Only if the separation is genuine. Paragraphs 1A and 2 of Schedule 1 to the 1994 Act let HMRC direct that persons carrying on what is really one business be treated as a single taxable person. VATDSAG05150 says HMRC must have regard to how closely the persons are bound by financial, economic and organisational links, and does not need to prove an intention to avoid VAT, only that the artificial separation resulted in avoidance. Shared bookings websites, a single cleaning contract, one bank account or one person taking every decision all point towards a single business. The tests are set out in VAT disaggregation and business splitting.

What happens to pricing once you are registered?

Notice 709/3 paragraph 5.2 says VAT is due on holiday accommodation at the standard rate on any charges you make, regardless of the length of occupation or the description of the charges. The standard rate is 20%, so VAT is one sixth of a VAT inclusive price. Guests are mostly private individuals who cannot recover VAT, so an owner has two choices: raise prices by up to 20%, or keep prices and give up one sixth of the income.

Illustration only. A cottage lets for £1,200 a week. If the price stays at £1,200 after registration, £200 is VAT and the owner keeps £1,000. To keep £1,200 the price must rise to £1,440.

Registration also brings recovery of VAT on costs such as cleaning, laundry, repairs, furnishings and agents’ commission, which partly offsets the output tax. Owners with low costs often look at the VAT Flat Rate Scheme. GOV.UK lists 10.5% for hotel or accommodation from 1 April 2022, but a limited cost business, one whose spending on goods is below 2% of turnover or £1,000 a year, pays 16.5%, which many holiday lets will be.

Notice 700/1 paragraph 5.1 says you must account for VAT from the date you become liable to register, and should not show VAT on invoices until you have your registration number.

What if registration was missed?

Notice 700/1 paragraph 14.1 says that if you should have been registered from an earlier date you must pay VAT on taxable supplies made from that date, and paragraph 14.2 warns that the penalty for telling HMRC late could equal the VAT you should have paid. Because the guests have already paid, the VAT usually comes out of the owner’s own pocket at one sixth of the gross takings. How penalties are worked out is covered in failure to notify penalties.

If turnover went over the threshold only briefly, paragraph 3.7 of Notice 700/1 describes exception from registration: you apply to HMRC and show that taxable supplies in the next 12 months will not go over the deregistration threshold.

How does the monthly check work in practice?

Illustration only. Sam owns two cottages in her own name. At 31 July her bookings for the previous 12 months come to £88,000, and at 31 August, after a busy summer, they reach £93,000. The rolling total went over £90,000 in August, so she must register by 30 September and is registered from 1 October. From 1 October every booking she takes carries VAT, so she has to decide before then whether to raise her prices for the following season or absorb the tax. If her husband also let a flat in his own name, his income would not be added to hers unless the two were really one business run together.

What mistakes come up most often?

Checking the threshold once a year instead of at every month end.
Counting only rent and leaving out cleaning, linen and booking fees.
Testing each cottage separately when they all belong to one person.
Assuming that putting one let in a spouse’s name is enough to keep both under the threshold.
Treating winter lets as exempt in an area without a clearly seasonal holiday trade, or without a tenancy agreement to prove residential use.
Waiting for HMRC to notice instead of registering and repricing early, which leaves VAT to be paid from takings already spent.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Related cover: Landlord insurance for let property. Ask for a quote or call 01795 841 310.

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.