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VAT on holiday accommodation: the £90,000 threshold, the 28-day rule, and what a cottage does differently from a B&B

Sergej Sitki · founder of ReceptionGO and host
Published 30 October 2026 · 6 min read

General information, not legal or tax advice. Check your own case with your local council, HMRC or the relevant revenue authority, or an accountant.

Holiday accommodation in the UK is standard-rated at 20%. You must register for VAT when taxable turnover in any rolling 12 months passes £90,000, across all your businesses, not per cottage. The reduced-value rule for stays over 28 days applies to hotels, B&Bs and similar establishments, not to a house let as holiday accommodation. There is no reduced rate for a cottage.

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A cottage that takes £7,500 a month through the summer is closer to the VAT threshold than the host’s “it’s just a holiday let” instinct suggests. Three of them, in one person’s name, cross £90,000 in a season. The income-tax changes of April 2025 did not touch this. VAT has its own notice, and it treats a cottage and a guest house differently.

What is standard-rated

Notice 709/3 says that if you supply holiday accommodation — a house, flat, chalet, villa, tent, caravan, houseboat — you account for VAT at the standard rate on the charges you make, whatever the length of the stay and whatever you call the charge. Accommodation held out as suitable for holiday or leisure use is holiday accommodation. A restriction that stops people living there all year does not take it outside the notice.

The registration line is £90,000 of taxable turnover in any rolling 12 months, or if you expect to pass it in the next 30 days alone. Exempt income, such as a normal residential rent, is not taxable turnover. Holiday-let income is. Commission you pay Airbnb is your cost, not a deduction from the value of the supply, unless the contract makes the platform the supplier. Read the VAT invoice the platform sends you before you add up a year from bank deposits: the bank shows the net.

The 28-day rule, and who it is for

HMRC’s own examples of places that are not “clearly seasonal” include London and Edinburgh. A winter let there does not become exempt merely because it lasted six weeks. Where the exception does apply, keep the agreement that shows residential occupation. A long stay also changes tenancy law and council tax, which is a larger problem than the VAT line.

Breakfast in a B&B is normally part of the accommodation supply or a catering supply, depending on how you sell it. If you quote “bed and breakfast” as one price, you do not get to treat the food as zero-rated groceries. The B&B guide covers the operational side; the VAT treatment of a single package is a question for the notice and your accountant.

Deposits, cleaning and the levy

• A non-refundable deposit is part of the consideration for the stay and follows the same VAT treatment as the rest of the charge. A deposit you refund in full is not your income.
• Mandatory cleaning is part of the price of the accommodation. Splitting it onto a separate invoice does not change the rate, and it can break the price-display rules.
• A visitor levy should be its own line. In Scotland the percentage is worked out on the charge excluding VAT. Do not run 5% on a VAT-inclusive figure and then add VAT again.

Income tax is a different question

Being over the VAT threshold does not decide whether HMRC sees you as a property business or a trade. A cottage with no services beyond the changeover is usually property income: no Class 2 or Class 4 National Insurance, and the mortgage-interest credit described in the tax guide. A guest house that supplies breakfast, cleaning during the stay and a host on call can be a trade, with National Insurance and the full deduction of finance costs. The same receipts can be in the VAT return either way. They do not go on the self-assessment form the same way. If the answer is unclear, that is the question to put to an accountant before the first quarterly VAT return, not after.