Serviced accommodation: how it works, what changed in 2025 and when it beats a standard let

Serviced accommodation means letting a furnished property by the night or the week to guests rather than by the month to tenants: contractors, relocating families, tourists, people between homes. Done well it can produce significantly more income than a standard tenancy. Done badly it produces a lot of laundry and not much profit.

Planning: can you do it at all?

• London: the Deregulation Act 2015 lets an entire home be short-let for up to 90 nights a year without planning permission. Beyond that you need a change of use, which many boroughs refuse. Letting individual rooms while you live there is treated differently.
• Outside London: there is no fixed night limit, but a council can decide a property has changed use to short lets and require planning permission, particularly where there are complaints or the area is under pressure. The government has been introducing a registration scheme for short-term lets in England; check the current position before you launch.
• Leasehold flats: most leases prohibit short lets outright. Check the lease before you buy anything.

Business rates or council tax

In England a self-catering property is assessed for business rates rather than council tax if it is available to let for at least 140 nights a year and was actually let for at least 70 nights in the previous twelve months. Small business rate relief can then reduce the bill to nothing for a single property, which is a real saving. If you fall below the thresholds you pay council tax as normal.

Tax: the furnished holiday lettings regime has gone

Until April 2025 qualifying holiday lets enjoyed the furnished holiday lettings regime: full mortgage interest relief, capital allowances on furniture, and access to business asset disposal relief on sale. That regime was abolished from 6 April 2025. Serviced accommodation income is now taxed like any other property income. For individuals that means the Section 24 finance cost restriction applies, and from April 2027 property income tax rates rise by two percentage points. For companies nothing much changed: interest remains deductible and profits are subject to corporation tax.

This has shifted the calculation for some operators towards company ownership, and it makes the pre-2025 spreadsheets you may find online unreliable.

What it costs to run

Model serviced accommodation on nightly rate multiplied by realistic occupancy, then take away the costs that a standard let does not have:

• Cleaning and linen for every changeover.
• Utilities, broadband, TV licence and consumables.
• Furniture, replacement and wear.
• Booking platform commissions (typically 3% to 15% depending on channel and who pays).
• Pricing software, guest messaging tools, key safes or smart locks.
• Insurance written for short lets, which standard landlord insurance is not.
• Management, either your time or a fee of around 15% to 20% of revenue.

A property that grosses twice the standard rent can net less than it after those lines, or a great deal more. The spread depends on location, seasonality and how tightly it is run.

Operations that make the difference

• Pricing: dynamic pricing tools adjust nightly rates to demand, events and lead time. Set floors so a quiet week does not turn into a loss.
• Channels: Airbnb and Booking.com bring volume; direct bookings from repeat guests and corporate clients bring margin. Contractors on long stays are often the most valuable guests of all.
• Guest communication: fast, consistent messaging drives reviews, and reviews drive ranking. This is one of the first things worth automating, with a human checking anything unusual.
• Compliance: a fire risk assessment, gas and electrical certificates, smoke and carbon monoxide alarms, and a written house rules document you can rely on for damage claims.

When serviced accommodation beats a standard let

It tends to win where demand is year-round rather than seasonal (hospitals, universities, business parks, infrastructure projects), where the property is easy to reach and easy to clean, and where the owner or manager runs it as a business rather than a hobby. It tends to lose where planning is hostile, where the lease says no, or where the occupancy assumption came from the best month of the year.

The honest comparison is net cash flow after all costs against the net cash flow of a good tenancy, over a full year, with a void or slow-season allowance on both sides. AIRPROP runs both models for its own properties and for clients; book a free call if you want that comparison for a property you own or are considering.