UK Budget adds 4% levy on short-term rental income

The Treasury confirmed that short-term holiday rentals will face an additional 4% tax on property income, raising the rate for basic-rate taxpayers from 20% to 24% and for higher-rate earners to 44% or 49% from April next year. The measure is part of the budget package presented by Chancellor John Healey and is intended to help fund initiatives such as a £100 energy-bill rebate for households.

Industry representatives warned that the extra levy will increase financial pressure on a sector already coping with higher costs and a proposed "holiday tax" on overnight stays from 2028. > "It is incredibly unhelpful at a time when tourism is under so much pressure; it’s yet another payment to find," said Alistair Handyside of the Professional Association of Self-Caterers. > "All the costs are going up and now the Government is taking more, and of course we’re not able to put up prices, so everyone’s margin decreases again.

The Office for Budget Responsibility estimates the new rates could generate about £1 billion in the 2028-29 fiscal year, stabilising at roughly £800 million in later years. Pavan Mandir of UK Landlord Tax noted that an Airbnb owner in the higher tax band earning a typical £24,000 profit could see their tax bill rise by £960.

HMRC data indicate around 450,000 properties are available for short-term lets, with about 130,000 individuals reporting £2.5 billion in profits last year. The change follows the abolition of the furnished holiday lettings regime on 6 April 2025, which had previously offered more favourable tax treatment. Airbnb declined to comment.