Short-Let vs Traditional Let in London: The Honest 2026 Comparison
Owner Guide · London · Short-Let vs Buy-to-Let 2026
Short-Let vs Traditional Let in London: The Honest 2026 Comparison
The short-let vs long let debate has grown more complicated in 2026 than it was two years ago. The Furnished Holiday Let tax regime is gone. Section 21 evictions are gone. The 90-day planning rule remains. And the Renters’ Rights Act has changed what a traditional AST involves for a landlord. This is the comparison that accounts for all of it.
The Income Reality
The most common version of the short-let pitch runs like this: Airbnb nightly rates are three or four times the equivalent long-let daily rate, so short-letting must be more profitable. The arithmetic is real at a nightly rate level, but it does not tell the full story. The 90-day planning rule and a cost structure that has no parallel in a traditional let both reshape the comparison significantly.
Consider a central London one-bedroom flat, valued at approximately £550,000, assessed under both strategies with realistic numbers:
These are illustrative figures for one property type. The actual outcome depends on the nightly rate achieved, occupancy within the 90-night window, local mid-term demand, management costs, and the owner’s specific tax position. An unmortgaged basic-rate taxpayer sees a very different result. A premium property achieving £350/night across a fully occupied 90-night season changes the short-let column materially. The purpose here is to show the direction of the effect, not to prescribe a universal outcome.
The headline observation: the higher gross income generated by short-let nightly rates is absorbed by a heavier cost load. For a higher-rate taxpayer with a mortgage, operating within the 90-day planning cap in Greater London, the after-tax net return from short-letting is often comparable to or below that of a well-managed traditional AST. The position shifts in the short-let’s favour when: the property achieves premium nightly rates with near-complete occupancy across the 90 nights; the owner holds the property without a mortgage; or the owner has obtained planning permission to operate beyond 90 days and can run a year-round short-let operation.
Where the Costs Diverge
The cost difference between the two strategies is the part of the comparison most frequently underestimated by owners considering the short-let market. The table below shows typical cost categories for both approaches on the same property.
The 35 to 50% cost load on short-let gross income is not fixed. It falls for owners who self-manage, but the time input rises sharply. For most owners treating the property as an investment rather than an active business, professional management is essential, and that cost is real and recurring.
The Tax Position in 2026
Until April 2025, short-let properties qualifying as Furnished Holiday Lets (FHLs) received significant tax advantages over traditional buy-to-let: full mortgage interest deductibility, capital gains reliefs (Business Asset Disposal Relief, Business Asset Rollover Relief), and the ability to count FHL profits toward pension contributions. The government abolished the FHL regime from 6 April 2025 with no grandfathering of existing FHL properties. All short-let properties are now treated as ordinary property businesses, subject to the same rules as traditional ASTs. If previous decisions about your property were based on FHL tax benefits, those assumptions no longer hold.
Section 24 of the Finance Act 2015 removed the ability for individual landlords to deduct mortgage interest as a business cost. Instead, they receive a tax credit equal to 20% of the mortgage interest paid. For a basic-rate taxpayer (20%), the credit cancels the tax on the interest and the effect is neutral. For a higher-rate taxpayer (40%) or additional-rate taxpayer (45%), the restriction is material: tax is charged on gross profit including the mortgage interest amount, and the 20% credit only partially offsets this.
In 2026, both short-let and traditional AST income are subject to Section 24 in exactly the same way. Before April 2025, FHL properties escaped Section 24 because FHL income was treated as a trade rather than a property business. That distinction no longer exists. A mortgaged property generating short-let income and a mortgaged property generating AST rental income are now taxed identically on their mortgage interest, removing one of the major tax arguments that previously favoured short-letting for leveraged owners.
One route that changes this picture is holding the property through a limited company. Mortgage interest remains fully deductible as a business cost for companies (Section 24 applies only to individuals and partnerships). For properties held in a company, the short-let vs long-let financial comparison is not affected by Section 24. Restructuring from personal ownership to a company involves Stamp Duty Land Tax on the transfer and potential Capital Gains Tax consequences, so the decision requires professional tax advice before acting.
The Regulatory Landscape
The two strategies operate under different regulatory regimes, and both have become more demanding since 2022. Neither is without obligation; the obligations point in different directions.
The direction of risk differs between the two strategies. Short-let risk is primarily planning risk: exceeding 90 days without permission exposes the owner to planning enforcement action from the London borough. Traditional let risk is primarily tenant-management risk: in a post-Section 21 environment, recovering possession from a difficult tenant requires legal proceedings under Section 8 grounds, which takes longer and costs more than a Section 21 notice did previously.
Who Should Choose Which Strategy
Short-letting suits you if...
Traditional letting suits you if...
The hybrid model suits you if...
Questions to Work Through Before Deciding
“The short-let nightly rate premium is real. What closes the gap faster than most owners expect is the combination of a 90-day planning cap, a 35 to 50% cost load on gross income, and the disappearance of the FHL tax advantages that previously made the short-let case easier to argue.”
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Join the CollectionFrequently Asked Questions
Is short-letting more profitable than a traditional buy-to-let in London?
Not automatically. For a higher-rate taxpayer with a mortgage, operating within the 90-day planning cap, the after-tax net return from short-letting is often comparable to or below that of a well-managed traditional AST once operating costs are fully accounted for. Platform fees, professional cleaning per turnover, management fees, consumables, higher insurance and void-period utilities can absorb 35 to 50% of gross short-let income, leaving a net margin that the higher nightly rate does not always overcome. The short-let premium is strongest for unmortgaged properties achieving premium nightly rates with near-full occupancy across the 90 nights, or for properties with planning permission to operate beyond the 90-day cap year-round.
Does Section 24 apply to short-let income in London?
Yes, from April 2025. Section 24 restricts mortgage interest deductibility for individual landlords: instead of deducting mortgage interest as a business cost, individual landlords receive a 20% tax credit on the interest paid. Before April 2025, short-let properties qualifying as Furnished Holiday Lets were exempt from Section 24 because FHL income was treated as a trade. The FHL regime was abolished from 6 April 2025 and all short-let properties are now treated as ordinary property businesses. Higher-rate and additional-rate taxpayers with mortgaged short-let properties have lost a significant tax advantage they previously held over traditional landlords.
What was the Furnished Holiday Let regime and why was it abolished?
The Furnished Holiday Let (FHL) regime treated qualifying short-let properties as a trade rather than a property business, provided the property met annual availability and actual letting thresholds (available to let for at least 210 days per year; actually let for at least 105 days per year). FHL properties could deduct mortgage interest in full, access Business Asset Disposal Relief and Business Asset Rollover Relief on capital gains, and count FHL profits toward pension contributions. The government abolished the regime from 6 April 2025, citing its impact on housing availability in tourist areas and the unequal treatment it created between short-let and long-let landlords. No new FHL claims can be made and all short-let properties are now subject to standard property income tax rules.
What has the Renters' Rights Act changed for traditional London landlords?
The Renters’ Rights Act (2025) made several significant changes to the private rented sector in England. The most important for landlords is the abolition of Section 21 no-fault evictions: landlords can no longer serve a Section 21 notice to end a tenancy without specifying a reason. All tenancies are now periodic from the outset; fixed-term ASTs no longer exist under the new regime. To recover possession, landlords must use Section 8 of the Housing Act 1988 and establish one of the statutory grounds: rent arrears, antisocial behaviour, intention to sell, and others. The Act also introduced a mandatory landlord redress scheme, a private rented sector database that all landlords must register with, and extended the Decent Homes Standard to the private rented sector. For landlords who previously used Section 21 as a management tool, the Act requires a more careful approach to tenant selection and a greater understanding of the Section 8 grounds and process.
Can I switch between short-let and traditional let on the same London property?
You can, though the switch from a traditional AST to short-let is not straightforward under the Renters’ Rights Act: you cannot short-let while a tenant is in occupation, and ending a tenancy to convert to short-let use requires a Section 8 notice on a valid ground. Moving from short-let to a traditional let is simpler: the property needs to be vacant, and you list it for rent. The hybrid approach (short-let for peak months, mid-term or corporate let for the remainder of the year) is used by owners who want to capture the nightly rate premium within the 90-day window while ensuring year-round income. Mid-term corporate lets of 30 days or more do not create the same statutory tenancy rights as an AST and are commonly used to bridge between short-let seasons.
Is it still worth short-letting a London property given the 90-day rule and the FHL abolition?
It depends on the property and the owner. For some properties and owners, yes: a premium property in a high-demand central London location, owned without a mortgage by a basic-rate taxpayer and managed efficiently within the 90-night window, can still outperform a traditional let on net income. The flexibility benefits (personal use of the property, no tenant relationship, quick exit from the market when circumstances change) have real value that does not appear in the financial comparison. For leveraged properties at average London nightly rates, the case is weaker in 2026 than it was before the FHL abolition removed the tax asymmetry between the two strategies. The most financially robust position for most owners is a hybrid strategy: short-let during the peak season at premium rates within the 90-night cap, combined with corporate or mid-term letting for the remaining months of the year.