The Impact of 2025 Autumn Budget on UK Holiday Let Owners

The 2025 Autumn Budget brought several measures that may affect the owners of holiday lets and other short-term rentals. On first glance, it all sounds like doom and gloom and further beatings being handed down by the Labour government to property owners, but when you dive into the details, there are still a few areas that need more development.

Whether you hold your property in your own name or inside a limited company, this article explains the headline changes, the practical tax implications for each ownership route, and what owners should consider doing next.

Key headline changes holiday let owners need to know about

• Property income tax rates to rise by 2 percentage points from 6 April 2027: that increases the tax charged on property income for basic, higher and additional rate taxpayers (so basic rate property income goes from 20% to 22% etc)
• New annual “mansion” high-value property surcharge from April 2028: on homes valued above £2m with tiered bands — relevant if you own very high-value second homes or holiday let.
• Local visitor/overnight-stay levies: Mayors and local authorities are being given powers to introduce levies on overnight stays that would apply to hotels, B&Bs and holiday lets. This could add a per-stay or per-night charge in some areas.
• Dividend and savings income tax rises: (dividend rates increase from April 2026 and savings/property rates from April 2027), this is important for owners of holiday let property through an SPV or Limited Company who normally extract profits via dividends.

What this means if you own the holiday let in your personal name

• Higher income tax on net rental profits: From April 2027, any taxable profit from property letting activity (after allowable expenses) will effectively be taxed 2 percentage points higher at each band, increasing the cash tax bill on the same profit. Example: a higher rate taxpayer with £50,000 of net property income declared on their tax return would face an extra £1,000 a year (2% × £50,000).
• Mansion tax: if your holiday let is valued above £2m, then from April 2028 you will be subject to an additional charge named: “High Value Council Tax Surcharge (HVCTS)” which is above and beyond regular council tax. The amount charged us based on tiers and ranges from £2,500 to £7,500 per annum. It is unclear at this stage how this will interact with business rates for holiday let owners who have made, or plan to make, the switch from council tax to business rates.
• Local visitor levies could reduce demand or require price changes: If your property sits in an area that implements a per-stay or per-night visitor levy, you may need to pass that cost to guests (risking lower bookings) or absorb it and reduce margins. At this stage it is unclear which territories may implement this charge.

Practical actions for personal owners

Make sure you are accounting for all your relevant costs when calculating your taxable profit on your holiday and keep a close eye on the interaction of the Mansion Tax with business rates. Don’t panic!

What this means if you hold the holiday let inside a limited company

• Company profits remain subject to corporation tax rules and are unaffected, but extraction costs will rise if you use dividends: Holiday let profits that are taxed within a limited company are subject to corporation tax which is no impacted by the 2% property income tax hike. However, extracting profits via dividends will be subject to dividend tax which is now increasing from 6 April 2026 by 2%
• Mansion tax: if your holiday let is valued above £2m, then from April 2028 you may be subject to an additional charge above and beyond council tax. The amount charged us based on tiers and ranges from £2,500 to £7,500 per annum. For property held within an SPV, this is more complicated because the government has said that the surcharge will apply to “owners of residential property,” and in this case, the “owner” is the limited company, not the individual directors and it has not fully clarified how it will treat non-individual ownership structures such as this. Until clarification is provided (not expected until 2026), it’s unclear whether a limited company owning a holiday let will be liable for the surcharge in the same way as a personal owner. Also, as with personal ownership, it is unclear at this stage how this potential charge will interact with business rates for holidays let owners who have made, or plan to make, the switch from council tax to business rates.
• Local visitor levies could reduce demand or require price changes: Same as personal ownership – if your property sits in an area that implements a per-stay or per-night visitor levy, you may need to consider how to handle that.
• Admin, finance costs and potential selling decisions: With personal property income rates rising, some owners may still find the company route preferable, but the increasing dividend tax reduce that gap. Running properties in a company still introduces admin, accountancy and potential tax on extraction; the latest Budget narrows but does not eliminate the trade-offs.
  

Practical actions for company owners

if you still have unpaid director’s loans in your SPV, consider paying that down rather than using dividends.

As with the personal name recommendation, keep a close eye on the developments of how the Mansion Tax interacts with business rates and specific feedback on whether or not the charge impacts limited company ownership.

Conclusion

The 2025 Budget narrows some of the historic tax advantages of running holiday lets through a limited company (because dividend tax rises raise the cost of extracting profits) while making ownership in your personal name more immediately expensive through higher property income tax from 2027.

The Mansion Tax surcharge may cause some upset for bigger holiday lets, but this will impact only a small percentage of owners as the average value of a holiday let is around £350,000 and not £2m. Furthermore, large holiday lets tend to buck the usual seasonality trends as they tend to be “event driven” in terms of their bookings and usually outperform regular holiday lets by some considerable margin. There are also unresolved issues around how business rates will interact with this extra charge for those properties who do not pay council tax and how limited company ownership affects the charge.

In summary, keep calm and carry on …