The UK property market is changing. For investors, the decision between a traditional vs short-term let is more complex than ever. The ‘staycation’ boom, which previously favoured short-term rentals, now faces tighter regulations and the end of long-standing tax benefits. At the same time, the traditional buy-to-let market continues to adapt to a high-interest-rate environment.
The choice between a stable long-term tenancy and a high-yield holiday let involves more than headline rental figures; it is a strategic decision that weighs financial returns against operational commitment and risk.
In this guide on ‘traditional vs short-term let’, we analyse the true net profitability of each strategy, focusing on the major tax and regulatory changes taking effect in 2025 that every investor must understand. Our goal is to help you align your property strategy with your financial goals to ensure a stable and successful investment.
The first step is understanding the basic structure of each model. The main difference involves more than the length of stay; it also includes the legal agreement governing the property. This dictates the rights and responsibilities of the owner and occupant.
A traditional, or long-term, let provides a tenant with their primary residence. These tenancies are for a fixed term, such as 6 or 12 months, and are governed by an Assured Shorthold Tenancy (AST) agreement. This legal structure gives the tenant specific rights and protections, creating a formal landlord-tenant relationship. It is the model that forms the foundation of the UK’s Private Rented Sector, offering investors predictable and stable income.
A short-term let, also called a holiday let, offers temporary accommodation to guests such as tourists or business travellers. The stay is for less than six months and is governed by a ‘licence to occupy’, similar to a hotel booking. The key distinction is that the guest has a primary residence elsewhere. This means they do not have the same statutory rights as a long-term tenant, giving the property owner more flexibility and control.
If a guest overstays, they can be treated as a trespasser, whereas removing a tenant from an AST requires a formal and lengthy court process.
| Feature | Traditional Let (BTL) | Short-Term Let (STL) |
| Legal Agreement | Assured Shorthold Tenancy (AST) | Licence to Occupy |
| Occupant | Tenant (Primary Residence) | Guest (Temporary Stay) |
| Lease Duration | 6-12+ months | 1 night to a few weeks |
| Income Stream | Stable, monthly rent | Variable, nightly/weekly rates |
| Management | Periodic tasks | Daily hospitality tasks |
Gross revenue is a vanity metric; net yield is what matters. Short-term lets appear to offer higher income, but a detailed examination of the costs reveals a different picture.
The higher gross income of STLs comes with much higher operational costs, which is the main disadvantage of the model.
Let’s compare traditional vs short-term let with a £164,995 apartment in Nottingham operated under both models.
| Metric | Traditional Let (BTL) | Short-Term Let (STL) | Key Takeaway |
| Gross Annual Income | £12,000 | £30,082 | STL gross income is over 2.5x higher. |
| Total Annual Costs | £2,196 | £13,364 | STL costs are over 6x higher. |
| Net Annual Income | £9,804 | £16,718 | The absolute profit from the STL remains higher… |
| Net Yield | 5.94% | 10.13% | …but the high costs mean the STL model requires a higher occupancy to remain profitable. |
This case study shows a well-run STL can be more profitable, but its high costs make it more sensitive to dips in occupancy or unexpected expenses. The BTL offers lower but more stable returns. Read more here to understand the difference between net yield and gross yield.
A favourable tax regime for Furnished Holiday Lets (FHLs) made them an attractive option for years, but this is set to change.
From 6 April 2025, the FHL tax regime will be abolished, aligning the tax treatment of traditional and short-term lets. This removes several major advantages for STL owners:
This tax change is the most important factor in the traditional vs short-term let debate. The tax support for the STL model is gone. Now, the decision must be based on operational profitability alone.
The rapid growth of STLs has led to a series of new regulations, creating a higher barrier to entry.
The 90-Day Rule will still allow a homeowner to let out their own main residence for up to 90 nights a year without needing planning permission.
While all landlords must adhere to strict safety standards (Gas Safety, EICR), the path to legally operating a new STL is becoming much more complex and costly than setting up a traditional BTL.
Choosing a letting strategy is a financial and lifestyle decision.
For those who lack the time or desire for this level of work, professional management is key. A specialist STL management company can handle the entire hospitality operation, turning an active business into a passive investment for you.
The right strategy between traditional vs short-term let depends on location, market trends and your personal goals.
A balanced approach is a blended portfolio. Use stable BTL properties as a secure foundation, then add a high-yield STL in a prime location to capture upside while reducing overall risk.
The main reason is the possibility of much higher gross rental income. By using variable pricing, landlords can take advantage of peak seasons and local events to earn far more than they would from a fixed long-term rent.
The main disadvantages are income volatility due to seasonality, much higher operating costs (utilities, cleaning and fees), intensive day-to-day management and an increasingly strict and complex regulatory environment.
Legally, it depends on the contract. A property let for 6 months under an Assured Shorthold Tenancy (AST) is a traditional let, as it provides a tenant with their main home. A 6-month booking for a guest who has another primary residence would be considered a short-term or holiday let.
For a traditional let (AST), there is a formal check-out process, deposit return and re-marketing. For a short-term let, the guest simply checks out as they would from a hotel, followed by immediate cleaning and preparation for the next arrival.
The UK rental market in 2025 is undergoing significant change. The choice in the traditional vs short-term let debate is no longer simple. The abolition of the FHL tax regime has removed a key financial support for STLs, forcing investors to focus purely on operational performance.
There is no single “best” strategy; the right choice on whether you choose traditional vs short-term let depends on your property, its location and your personal financial goals.
In this complex environment, expert guidance is vital. A successful investment requires a strategy for the future that anticipates market shifts and a strong operational system to ensure compliance and maximise performance.
For expert guidance on building your property investment strategy, contact the Prosperity Wealth team today for a no-obligation consultation to navigate the future of UK property investment with confidence.
