Running a holiday let can be enjoyable and rewarding, but before you venture into holiday letting, you need to ensure your business will be a viable success. To make it successful and generate a good profit, you need to consider the main expenses so you can work out your finances realistically.
Here, we’ll detail the most common holiday home costs you’ll need to factor in, so you can draw up a budget, work out your holiday let running costs and avoid potential surprises further down the line. And to help, we’ve split any potential outgoings into ‘setup’, ‘weekly’ and ‘monthly/annual costs.’
These expenses will vary depending on the size of your property – but we’ve based them on a 2-bed holiday cottage.
Setup costs for holiday lets
Holiday let mortgage payments
If you own your holiday let outright, this significantly reduces your expenses. But many holiday lets are mortgaged and require monthly repayments.
Holiday let mortgage interest rates are significantly higher than those for a regular home loan, with a typical fixed rate for 2 years being approximately 5%. Additionally, lenders ask for a 25% deposit of the value of the loan.
Holiday let stamp duty costs
When purchasing a second home in England and Northern Ireland, a higher rate Stamp Duty Land Tax (SDLT) applies. The charge works on a tiered basis from 5% and increases in relation to the value of the property.
Cost of furnishing a holiday let
Although there is a significant upfront cost to furnishing your holiday let to a high standard, it will ensure your property stands out from the competition and appeals to potential guests.
Consider allocating funds for popular features that are likely to earn you more revenue. Holiday lets with a hot tub generally earn 49% more than those without, and adding an open fire could increase your earnings by 19%.
Budget £15,000 to kit out and furnish your property, but features such as a hot tub could set you back an extra £3-£6k.
Weekly costs of running a holiday let
The more bookings you have, the higher your overheads will be, but this will be offset against the increased income. Here we highlight some of the most common costs you will need to consider on a weekly basis when letting your holiday home.
Holiday let agency management costs
Even if you’ve got the most attractive holiday let in the UK, if it doesn’t get exposure, it’s not going to get booked up. Unless you are managing everything yourself, you will need to enlist the help of a holiday let management company.
Using a holiday letting agent to manage your property will come at a cost, but it can also free up considerable time. The fee and commission rate you pay depend on the level of service you choose.
Startup costs: Some agents charge £100-£250 when signing up to take photos of the property and set up the website listing.
Commission fee: Typically, the fee you can expect to pay ranges from 15% – 25% (plus VAT) per booking. Sometimes, fully managed service fees are bundled in with the commission to cover every aspect of your holiday cottage management from the bookings to the cleaning and laundry, maintenance, key collection and emergency call outs. This may make the fees higher.
Management fee: Alternatively, some agencies charge a lower commission and separate fees for additional services. For example, fixed fees for a maintenance callout, cleaning or laundry.
Annual cost: Like the setup fee, some agencies charge a fee every year to cover the cost of keeping your website listing and photos up to date.
Holiday let changeover and cleaning costs
First impressions count for everything when it comes to holiday letting. The cleanliness of your holiday let is paramount and can mean the difference between a great review and a negative one. So, ensuring your holiday cottage is immaculately clean for arriving guests is essential.
If you aren’t using a management agency, do not have the time or don’t live near your holiday let, you’ll need to hire a professional cleaning service for changeovers.
For a two-bed holiday cottage, holiday let cleaners typically charge between £10-£20 an hour or £50-£100 for cleaning and laundry, allowing 5 hours for the changeover.
Depending on the cleaner, you might have to allow £100 for the set-up cost of equipment and £20 a month to replace these items in busy holiday homes. It is also important to factor in £200 for deep cleaning once a quarter.
Crisp, clean and high-quality linen is also essential. Although many cleaning companies offer a laundry service, you might find that it’s more cost-effective to handle the laundry yourself. If you are doing it yourself, you need to consider whether your facilities for cleaning the laundry are adequate. There’s also the additional costs for the washing, drying, ironing and buying 3 sets of everything.
An alternative is to outsource your linen hire and laundry to a company that ensures laundry is cleaned to a professional standard. Hiring linen also means that you avoid the initial cost of buying multiple sets of bedding and towels, and the worry of replacing items that get worn or damaged.
A two-bedroom property sleeping four guests roughly costs £60 per changeover for linen hire but it depends on the number of items.
Welcome pack costs
It’s the small personal touches that make a big impact and, a welcome pack is one way to make a great first impression and make guests feel appreciated.
A welcome pack doesn’t have to blow the budget, how much you choose to spend is entirely up to you. Items typically include the essentials such as milk, bread, tea, coffee, eggs, biscuits, local cheese or luxury toiletries to make the stay an even more enjoyable one.
The average cost of a welcome pack for a 2-bed cottage will be roughly £15 – £20 per booking. If you have a larger property or cater to the luxury higher end, including items such as luxury toiletries and treats, will cost more money.
You will also need to factor in the cost of replacing regular guest supplies such as toilet rolls, washing up liquid, toiletries etc.
Booking platform fees
The popular listing sites where you can advertise your holiday home, such as Airbnb, VRBO and Booking.com, charge a booking fee which covers processing guest payments, marketing to guests, and customer support. Here’s what the fees are at the time of writing.
Airbnb There are 2 types of fee structures on Airbnb, split fee and single fee. With the split fee, 3% is deducted from the hosts price, in addition, guests pay a 14.1% to 16.5% service fee on top of the price. With the single fee, a single service fee is deducted from the host’s price. It’s typically 14 to 16% and most hosts who use property management or channel management software are on a single fee. Vrbo Hosts pay a 5% commission fee plus a 3% payment processing charge per booking.
Booking.com Commission rates range from 10% and 25% depending on factors such as location and property type, but the typical commission rate for hosts is around 15% of the total booking amount. You need to register on their website to find out what fees apply.
Holiday let waste collection costs
Household waste from your holiday let business is classified as commercial waste, and you’ll have to pay for its collection rather than using the council’s household waste services.
Prices typically start from around £8 per collection (plus the bin rental), depending on your location, property size and occupancy. Alternatively, some refuse collector charge approximately £3 a bag that can be collected on the changeover day, so guests arrive to empty bins.
Monthly/annual costs of running a holiday let
Holiday let insurance
As an owner, you need to ensure you’re protecting your holiday home and guests should anything bad happen, such as a break-in, flooding, a fire or injury. Taking out the right insurance for your holiday let will help you protect a major financial investment and give you peace of mind.
Roughly, the average annual cost to insure a detached holiday let cottage in Cornwall: buildings sum insured £200,000 and £15,000 contents, would be around £260 a year.
Cost of utilities and subscriptions
As with any home, you’ll have to factor the price of utilities into your holiday let running costs for services such as electricity, gas and water. Depending on the occupation rate and insulation installed, budget £80-£100 per month.
High-speed wi-fi is also a deal-breaker, budget £30 per month for fibre.
Your holiday let will need to be a ‘home from home’ retreat for your guests, who will want access to streaming and TV subscriptions. Monthly costs
Sky TV from £15
Netflix from – £5.99
Amazon Prime – £5.99
TV Licence – £174.50 per year
Holiday home maintenance and gardening costs
Guests expect the holiday cottage they’ve booked to be in tip-top condition both inside and out. To ensure this, you’ll need to consider ongoing monthly costs such as a professional gardening service at £80 per month and window cleaning at £20 per month.
Basic hot tub maintenance costs £150 a month on average.
Decorating, furnishings & unexpected costs
Due to the constant influx of guests, holiday lets are subject to heavy wear, tear and breakages. At least every quarter, you should assess whether your holiday cottage needs a general freshening up and items replacing. Perhaps new paint on the walls or sofa, and carpet cleaning. Expect to budget £1000 a year.
Unexpected expenses can’t be predicted, and often play havoc with your budget, but there are always going to be unexpected costs when holiday letting. Whether it’s a faulty boiler, plumbing issues or urgent appliance repairs, they are all things that need to be sorted immediately.
It’s essential to have some money put aside for these emergencies, you should budget £50 per month.
Accountancy costs
Tax can be a complicated subject, and the laws change frequently. Using the services of a professional accountant to manage your holiday let finances could ensure that you are paying the correct tax, as well as making the most of any allowances.
Accountancy costs can vary, but you can expect to pay roughly £250 as a fee for their help, advice, and to submit your tax return.
Holiday let business rates and council tax
You will either pay holiday let business rates (if you qualify) or council tax. Council tax tends to be the more expensive of the two, as some councils have introduced a large council tax premium for second homes.
Furnished holiday lets in England are subject to business rates rather than council tax only if they meet the following criteria:
The property has been available for short-term lettings for more than 140 nights in the last 12 months.
It will be available for short-term lettings for more than 140 nights in the next 12 months.
It has been let for 70 days in the last 12 months.
There are different rules if your property is in Scotland or Wales.
For further reading, check the government website here.
Annual holiday home safety checks
As a holiday home owner, it is crucial for your property to meet the legal safety requirements and ensure annual testing to ensure your guests are safe. Here’s what to budget for.
Gas safety check By law, these must be conducted once a year in all rentable properties, and you can expect to pay £80-£120 for a qualified engineer to visit, test and issue your Gas Safety Certificate.
Portable appliance testing (PAT) Holiday lets must conform to minimum electrical standards, and in general, it is a good idea to have your electrics assessed every 5 years. Depending on the size of your home, expect to pay £200.
PAT testing your electronics and appliances will cost £100 – £150 annually.
Risk assessments As a holiday let owner, you will be required to carry out risk assessments. There’s useful information and checklists available online about how to self-assess your holiday home. If you are looking to outsource this, you’ll need to employ a specialist to carry out the assessment which will cost £100-£200.
Hiring a fire safety assessor will cost you around £200-£300 for a small cottage.
Chimney sweeping Regular cleaning of your chimney or flue can reduce the build-up of soot, clear obstructions such as bird and insect nests, and help prevent fires and carbon monoxide poisoning.
A typical price for professional chimney sweeping will start at around £60 (for a single chimney).
Marketing and advertising costs
If you don’t use an agent or want to avoid site commission fees and increase direct bookings, you’ll need to invest in marketing.
Creating a website to promote your holiday cottage is essential when it comes to gaining visibility and trust on the internet. A website allows people to instantly check availability and book directly with you, and acts as a great platform to show off your cottage’s best photos and reviews.
Typical annual costs for your own website
Hire a developer (one-off cost): £500 to £1,000
Domain name: from £12.99 per year
Hosting: £6 per month
Or you can use one of the many platforms to create a website for around £200 per year.
Running paid advertisements on Google, Facebook, Instagram and TikTok can work well when you have a direct booking website. However, you can easily burn through your budget unless you know how to manage your spending and performance. Budget £50 per month.
You can also invest in professional photography to promote your property on listing sites, your website and social media. This usually costs £300 for half a day, and £70 for additional hours.
Some website builders include PMS software which incorporates dynamic pricing and booking management to automate tasks. If paying for PMS software budget £20 a month.
How to track your expenses
You can’t manage what you don’t measure. Once your holiday let is up and running, use Google Sheets or Excel to track your expenses. Split them into categories: fixed costs, variable expenses, and unexpected expenses. Your property management system may also have accounting functionality to track expenses.
You’ll usually need 12 months of tracking data so you can accurately forecast expenses and budget accordingly.
Tips to reduce your holiday let costs
By reducing your expenses, you’ll increase your net income. Here are some simple ways to reduce costs.
Take advantage of tax breaks There are certain holiday let tax breaks that owners can benefit from, such as deductible expenses and small business rate relief. Speak with a tax professional to understand how these affect your specific circumstances.
Reduce your heating costs Making your make your holiday home eco-friendly can help lower your energy bills over time.
Invest in the best Buying quality items that can withstand heavy use will cost more at the outset, but they tend to look better and won’t need replacing as often.
Keep on top of maintenance Maintaining your holiday home will reduce the risk of long-term damage and expensive repair costs.
Shop around for the best deal Shopping around for the best deal on your insurance and utility costs can help you lower your costs.
Increase direct bookings Having a strong social media presence and a direct booking website reduces marketing expenses and commission payments to listing sites.
Get hands on Delegating the management of your holiday cottage to an agency or hiring a cleaner will free up time but cost more. Managing more tasks yourself will cut down on costs, but outsourcing could bring in higher revenue.
Protect your property Problem guests and property damage are two of the biggest unplanned expenses that can turn a profit into a loss. While guest screening can reduce the risk of parties, specialist holiday letting insurance protects your property when the worst happens.
Automate If you manage your holiday let, PMS software can automate most tasks, such as guest communications, booking calendars, pricing, payments and allocating cleaners. Your time isn’t free, and automation frees up your time.
How much could you earn from letting your holiday cottage?
Now you have an idea of how much it costs to operate a holiday let, you need to calculate how much you could make to see if it’s viable. It all depends on the type of property, the location and its features, but on average, holiday let owners earn £24,000 a year.
The annual cost of running a holiday let is roughly £7,500, however, agent and commission fees will increase this figure. With the right approach to marketing and managing expenses, holiday lets still have a strong earning potential.
To summarise
Every holiday let will vary in cost to run. The size of your property, the added extras you provide and whether you outsource tasks or take on the responsibilities yourself will all affect your outgoings and profit.
Specialist Holiday Home Insurance
If you need peace of mind for your holiday home, you may want to consider specialist holiday home insurance through Schofields. With flexible, tailored cover designed for holiday home owners, we can help make sure you're properly protected. Get a quote online today.
Please note the information provided on this page should not be taken as advice and has been written as a matter of opinion. For more on insurance cover and policy wording, see our homepage.