Holiday Lets, Serviced Accommodation And The 5% VAT Rate

Chancellor Rishi Sunak's recent summer statement announced a number of initiatives to help the UK economy recover. Apart from raising the Stamp Duty Land Tax threshold which I discussed last week, he reduced VAT from 20% to 5% in the hospitality sector ...

Holiday lets and serviced accommodation will benefit from the temporary VAT reduction meaning a night's visit that would normally cost £120 will now cost the customer £105. This is a significant saving if a family stays for a couple of weeks at your property.

Just like hotels, holiday lets and serviced accommodation are subject to VAT. This means that if your annual turnover exceeds £85,000 you must register for and charge VAT on the rental income at 20%. Since you may be dealing direct with the consumer, who cant recover this VAT, this can make you uncompetitive against your non VAT registered neighbour.

As an example:

If a family of four wanted to stay in a British costal property for two weeks, they could be looking at a final bill of £2,400 just on the accommodation. This may seem too much for many, but with the VAT reduction to 5%, this now becomes £2,100 which is a significant reduction of £300 on the holiday.

The Chancellor is hoping that the reduction in VAT from 20% to 5% on holiday lets and serviced accommodation is going to have a positive effect on the market.

Fingers crossed that your booking will jump considerably in the coming months.


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