Serviced Accommodation UK 2026 — Landlord Guide to SA Tax, Planning & Compliance

Planning permission — the 90-day rule and change of use

Planning is the most fundamental compliance issue for SA landlords in England:

• C3 to C5 use class change (England, January 2025): The government introduced a new Use Class C5 for short-term lets in January 2025. A property that is let on a short-term basis to guests who do not use it as their main home is classified as C5. A property that was previously C3 (single family dwelling) and is now exclusively used as SA requires planning permission to change to C5 use. Local authorities can enforce against non-compliant SA operators
• The 90-day rule (Greater London): Under the Deregulation Act 2015 (as amended), London properties can be let on a short-term basis for up to 90 nights per calendar year without requiring planning permission or change of use. This is a London-specific rule — there is no equivalent statutory 90-day rule for the rest of England (though some local authorities have adopted their own limits through planning conditions or local plans)
• Article 4 directions restricting SA: Many local authorities outside London are using Article 4 Directions to restrict the permitted development right that would otherwise allow short-term letting. In practice, Article 4 means a planning application is required before operating an SA in the designated area — councils in Edinburgh, Manchester, and coastal resorts have used this mechanism. Check the local authority's planning portal before converting a property to SA use
• National permitted development right (2023 consultation): The government consulted in 2023 on a permitted development right that would allow homeowners to let their own main home for up to 90 days per year without planning permission — mirroring London. As of June 2026, this national right has not been enacted. The C5 use class is the current planning mechanism
• Material change of use enforcement: Operating an SA without planning permission (where required) is a planning breach. Local authorities can issue Planning Contravention Notices and ultimately an Enforcement Notice requiring cessation of the SA use. There is no time limit on enforcement for a continuous planning breach (unlike some physical development breaches)

Tax treatment post-FHL abolition (from April 2025)

The abolition of the FHL regime is the most significant recent change for SA landlords:

• FHL regime abolished from 6 April 2025: Finance Act 2025 abolished the Furnished Holiday Lettings tax regime. From 6 April 2025, SA income is treated as ordinary property business income — subject to the same rules as a standard buy-to-let property. There are no transitional arrangements for existing FHL properties
• Mortgage interest restriction: Under the old FHL regime, mortgage interest was deductible in full against SA income. From April 2025, mortgage interest on SA properties is restricted under the same Section 24 rules as buy-to-let: only the 20% basic rate tax credit is available. Higher and additional rate taxpayers face a significant increase in their effective tax rate on SA income
• Capital allowances — transition: FHL properties could claim capital allowances on furniture and equipment. From April 2025, SA properties are treated as ordinary property income — capital allowances are no longer available on qualifying SA expenditure. Instead, the replacement of domestic items relief applies (as for standard residential lettings): relief is available for the cost of replacing domestic items (beds, sofas, white goods) like-for-like, but not for initial purchase
• Pension contributions: SA income was treated as relevant UK earnings for pension contribution purposes under the FHL regime (allowing landlords to make pension contributions matched to SA income and receive tax relief). From April 2025, SA income is not relevant UK earnings — landlords can only make pension contributions up to the level of their other earned income
• CGT and rollover relief: Under the FHL regime, CGT Business Asset Disposal Relief (BADR, formerly Entrepreneurs' Relief) was available on sale of a qualifying FHL property (10% CGT rate). From April 2025, BADR is not available on SA property disposals — residential CGT rates apply (18%/24% from 30 October 2024)

VAT — when SA income triggers registration

VAT is a critical consideration for higher-earning SA operators:

• VAT registration threshold: Where total taxable turnover (including SA income) exceeds the VAT registration threshold (£90,000 per annum from April 2024, frozen at this level for at least 2 years), the landlord must register for VAT and charge VAT on SA income. For a portfolio of several SA properties generating combined revenue, the threshold can be reached quickly
• SA is taxable for VAT purposes: Short-term letting of furnished accommodation to guests is a taxable supply for VAT purposes (standard-rated at 20%). This is different from residential lettings (which are exempt from VAT). Where an SA operator exceeds the threshold, VAT must be charged on nightly and weekly rates — this typically requires an increase in listed prices or absorption of VAT within the headline rate
• Input VAT recovery: A VAT-registered SA operator can recover input VAT on business costs — cleaning services from VAT-registered suppliers, consumables, maintenance, renovation work. This is an advantage of being VAT-registered for SA businesses with significant costs
• Mixed portfolio — residential and SA: Where a landlord has both long-term residential lettings (VAT-exempt) and SA properties (VAT-taxable), VAT partial exemption rules apply. Input VAT must be attributed to taxable or exempt supplies — professional advice is essential to avoid irrecoverable input VAT or VAT errors
• VAT on platform fees: Platforms such as Airbnb charge service fees and may charge VAT on these fees. Where the platform handles VAT on behalf of the host (through a 'merchant of record' model), the host's reported income from the platform may be the VAT-inclusive or VAT-exclusive amount depending on the platform's structure. Review platform invoicing carefully

Business rates vs council tax

SA properties may be subject to business rates rather than council tax:

• England — the 140-day rule: In England, a property that is available for short-term letting for at least 140 days per year AND is actually let for at least 70 days per year is assessed for business rates (not council tax). The Valuation Office Agency (VOA) makes this determination. Properties below the thresholds remain on council tax
• Small Business Rate Relief (SBRR): Many SA properties qualify for SBRR where the rateable value is below £15,000. Properties with a rateable value of £12,000 or below pay no business rates at all. Properties with rateable values between £12,001 and £15,000 receive tapered relief. Where SBRR applies in full, the SA property effectively pays neither council tax nor business rates — a significant advantage over residential lettings
• Council tax where thresholds are not met: An SA property that does not meet the 140-day/70-day thresholds remains on council tax. Some local authorities apply council tax premiums to short-term let properties or second homes — in England, councils can charge up to 100% council tax premium on properties empty for more than 2 years (Levelling-Up and Regeneration Act 2023)
• Wales — stricter thresholds from April 2023: In Wales, the thresholds for business rates assessment of holiday lets increased to 252 days available and 182 days actually let per year. Properties that do not meet these thresholds are assessed for council tax and may be subject to a 300% council tax premium in some Welsh councils
• Obtaining a business rates assessment (rather than council tax) and qualifying for SBRR has historically been a significant tax advantage of the SA model. HMRC has confirmed it will scrutinise SA properties to verify they genuinely meet the thresholds

Operational compliance — fire safety, EPC, and licensing

SA properties must comply with a range of physical and regulatory standards:

• Fire safety: SA properties have higher fire safety obligations than standard residential lets because guests may be unfamiliar with the property and leave belongings that block escape routes. Smoke alarms on every floor (Smoke and Carbon Monoxide Alarm (Amendment) Regulations 2022), a carbon monoxide detector in rooms with solid fuel appliances, an annual gas safety check (Gas Safety (Installation and Use) Regulations 1998), and an Electrical Installation Condition Report (EICR) every 5 years are all mandatory. Many SA properties also provide a fire extinguisher and fire blanket for kitchen use
• EPC: All SA properties in England must have a valid EPC. Unlike residential rentals, there is currently no minimum EPC rating required for SA lettings (the minimum E rating applies to assured tenancies and ASTs under MEES). However, SA properties with poor energy ratings may score poorly on platforms where guests increasingly filter by sustainability credentials
• Short-term let licensing (London): London boroughs can introduce licensing for short-term lets. The Mayor of London and several boroughs have consulted on licensing schemes for SA properties. Operators should check their borough's current position
• Houses in Multiple Occupation: An SA property where multiple guests from different households share facilities simultaneously may constitute an HMO. Where 5+ guests from 2+ households are present, HMO mandatory licensing is required. SA operators must ensure their operational model does not inadvertently trigger HMO licensing requirements
• Platform reporting: HMRC requires digital platforms (including Airbnb, Booking.com, VRBO) to report UK host income annually under the DAC7 rules. HMRC receives this data automatically — SA landlords who have not been declaring SA income correctly should consider the HMRC Let Property Campaign for disclosure

Frequently asked questions