Serviced accommodation sits somewhere between a hotel and a home. Guests book a fully furnished, self-contained property for the night, week, or month with services like housekeeping, Wi-Fi, and utilities included as standard. It is one of the fastest-growing segments of the UK property market.
This guide covers what serviced accommodation is, how it differs from hotels, Airbnb, and holiday lets, the main setup strategies, and the key UK tax implications..
What Is Serviced Accommodation?
Serviced accommodation is a furnished property let on a short-term basis with services included as part of the rental price. Guests arrive to a property that is move-in ready.
Standard features typically include:
- A private, fully equipped kitchen
- Separate living and sleeping areas
- Wi-Fi, utilities, and council tax included
- Regular housekeeping and fresh linen
This is what separates serviced accommodation from a standard rental, where a tenant sets up utilities separately and signs a minimum six-month tenancy. It is also what separates it from a hotel as guests have an entire property to themselves, not a single room.
In the UK, the term covers several property types: short-term lets, serviced apartments, corporate lets, holiday lets, and contractor accommodation. These differ slightly in target guest and length of stay, but the operating model is broadly the same.
How Does Serviced Accommodation Differ from a Hotel?
Features | Serviced Accommodation | Hotel |
|---|---|---|
Space | Entire apartments or houses | Designed single room |
Kitchen | Equipped personal kitchen | No personal kitchen |
Budget | Cheaper for extended stays | Expensive for stays over one week |
Meals | Self-catering | Restaurant or room service |
Privacy | Private property, no shared spaces | Shared corridors, lounges, lifts |
Hotels work well for short stays of one or two nights. Serviced accommodation becomes the more practical and cost-effective choice from around a week onwards, particularly for families, corporate travellers on extended assignments, and contractors on regional projects.
Who Stays in Serviced Accommodation?
The type of guests a serviced accommodation property attracts depends heavily on its location, price point, and how it is marketed.
Corporate travellers and contractors represent the most consistent demand. Companies book serviced apartments for employees on short-term projects or relocations, and this sector drives significant occupancy in cities like London, Manchester, Birmingham, and Edinburgh. Families, relocating individuals, and insurance-placed guests make up much of the rest, with tourists filling gaps in leisure-focused locations.
The mix shifts by location and season. A city-centre apartment will skew corporate during the week and leisure at weekends. A coastal or rural property will be almost entirely tourist driven. The guest mix a property attracts has a direct bearing on occupancy patterns, achievable yield, and whether HMRC is likely to treat the income as trading income or property income for tax purposes.
How Is Serviced Accommodation Different from Airbnb and Holiday Lets?
These three terms are often used interchangeably, but they mean different things.
Airbnb is a booking platform, not a type of accommodation. Property owners list on Airbnb as a distribution channel. A serviced apartment listed on Airbnb is still serviced accommodation. An informal spare room listed on Airbnb by a homeowner is not. The platform is the channel; the accommodation type is separate.
A holiday let is a property rented specifically for leisure purposes. It is self-catering and typically let for a few nights to a few weeks. The term is often used loosely to mean any short-term rental, but it describes a specific use rather than a level of service.
Serviced accommodation is broader. It covers corporate lets, contractor stays, tourist bookings, and longer-term arrangements. The property is professionally managed, fully furnished, and marketed across multiple booking channels including Airbnb, Booking.com, direct booking sites, and corporate travel portals.
How Do You Find and Book Serviced Accommodation in the UK?
Serviced accommodation in the UK is booked through several channels depending on the type of stay.
Online Travel Agencies (OTAs)
OTAs are the most common starting point. Platforms including Airbnb, Booking.com, and VRBO list thousands of serviced properties across the UK. Guests can search by location, date, and property type, compare pricing, and book directly through the platform. Each OTA has its own fee structure and cancellation policy, so it is worth checking these before confirming.
Direct booking websites
Many professional serviced accommodation operators run their own booking sites, which can offer lower rates as the OTA commission is removed. Searching for a specific city alongside "serviced apartment" often surfaces direct booking options.
Corporate travel portals
Companies booking accommodation for employees often use specialist platforms or work directly with serviced apartment operators. If you are booking for business travel, your employer's travel policy may direct you to specific approved suppliers.
What Are the Different Ways to Set Up Serviced Accommodation?
For property investors considering serviced accommodation, there are three main ways to structure the operation. Each has a different capital requirement, risk profile, and income potential.
Buying Property to Use As Serviced Accommodation
The most capital-intensive approach. You own the asset, benefit from any price appreciation, and can make structural changes to fit your operation. A commercial mortgage is typically required, with most lenders offering up to 75% LTV on the open market value. Arrangement, broker, valuation, and legal fees apply on top.
Rent-to-Rent Serviced Accommodation
You lease a property from the landlord at an agreed monthly rent, then let it to guests at a higher nightly or weekly rate. The model requires less upfront capital than purchasing and can generate returns within a few months if the property and location are right. It works on the principle of control rather than ownership.
Acting as a Property Manager
You manage someone else's property on their behalf and charge a commission on revenue generated, typically 15% to 20%. This requires no capital outlay and carries no direct financial risk. The income is lower, but so is the exposure. This model suits those with operational skills and local market knowledge rather than available capital.
For Example,
Lucy owns a property, and you, as a middleman, manage Lucy's property. You charge a fee based on revenue generated by serviced accommodation. If serviced accommodation generates revenue of £1,500 per month and you charge a commission of 20%, you will have an income of £300.
The right choice depends on your starting position, available capital, and what you want the business to look like in three to five years.
What Tax Do You Pay on Serviced Accommodation Income?
Serviced accommodation in the UK attracts these main taxes: VAT, income tax or corporation tax, and Capital Gains Tax. The tax treatment depends largely on whether the income is classified as trading income or property income as this affects which reliefs are available and how the business should be structured.
VAT
VAT is an indirect tax charged on customer spending on most goods and services supplied in the UK. It is suffered by the final consumer and is collected by businesses on behalf of HMRC. If the annual turnover from your serviced accommodation business exceeds the VAT threshold (For the Tax Year 2024/25, it is £90,000), you may need to register for VAT. This could affect the prices you charge and the amount of VAT you must account for.
Two schemes are relevant for serviced accommodation operators:
Flat Rate Scheme
Under a Flat Rate Scheme, a business calculates its VAT by applying a flat rate to its total turnover. The flat rate for service accommodation is 10.5% with a 1% discount for the first year. You can't reclaim input VAT for most of the supplies. To register, you must not have a turnover over £150,000. However, this scheme is only temporary, as you need to leave the scheme as soon as your turnover exceeds £230,000. The flat rate scheme is illustrated below:
For Example,
In the year ended 31 December 2025, Service Ltd has annual sales (standard-rated) of £135,750 and expenses (standard-rated) of £6,750. The VAT liability under the normal method and standard-rated method is illustrated below:
Normal Method
Particulars | Total | Output VAT/(Input VAT) |
|---|---|---|
Output | £135,750 | £22,625 |
Input | £6,750 | (£1,125) |
VAT payable | £21,500 |
Flat Rate Scheme
Using a Flat Rate Scheme, Service Ltd has a liability of £14,253 (£135,750 * 10.5%), resulting in a tax saving of £7,247. However, claiming a flat rate scheme may not be beneficial if you have higher standard-rated expenses. For businesses using the Rent-to-Rent model, most of their cost is rent paid to landlords, which is an exempt supply (supplies not subject to VAT), so using a flat rate scheme might benefit them.
Tour Operators Margin Scheme (TOMS)
Serviced accommodation rentals in the UK may fall under TOMS (Tour Operators Margin Scheme) if they offer services catering to travellers and fulfil certain conditions.
If the venture qualifies for TOMS, assessing whether the margin exceeds £90,000 before considering VAT registration is essential.
TOMS is a complex area and specialist advice is strongly recommended before deciding whether it applies to your operation.
Income Tax and Corporation Tax
Serviced accommodation can be treated both as property income and as trading income. Supplying additional services, including serviced accommodation, is more likely to be treated as trading income. It should be well furnished and readily available for travellers to stay in so that they can be treated as part of trading activity. There are advantages to this being classified as a trading business rather than a property business. Modern serviced accommodations are most likely treated as trading income rather than property income.
You must report the income on your Self-Assessment Tax Return through the SA100 form. If you are running through the company, you should file CT600. When you are running serviced accommodation, it's essential to keep detailed records of all income and expenses related to the property to calculate your tax liability accurately.
Capital Gains Tax
If you sell a serviced accommodation property, Capital Gains Tax may be due on any gain above the annual exempt amount.
The CGT treatment depends on how the income has been classified. If the business has been operated as a trading activity, Business Asset Disposal Relief (BADR) may reduce the CGT rate to 10% on qualifying gains. Rollover Relief may also be available where proceeds are reinvested in qualifying business assets.
The Furnished Holiday Letting (FHL) regime, which previously provided automatic access to these reliefs, was abolished with effect from 6 April 2025. Properties that were previously treated as FHLs no longer qualify under that regime. Whether the reliefs remain available depends on whether the specific property meets the trading income tests on its own merits.
Conclusion
Serviced accommodation spans property investment, short-term letting, and active business management. Understanding what it is, how it is taxed, and how the three setup models differ gives any property investor a clearer basis for deciding whether it is the right strategy. The removal of the FHL regime in April 2025 has changed the tax position materially, and the income classification and CGT relief questions now turn on the specific facts of each operation rather than a straightforward regime test.
If you are running or considering a serviced accommodation business and want to make sure the tax treatment and compliance are handled correctly, UK Property Accountants can help.
FAQs
It depends on location. In England, a new C5 use class for short-term lets was proposed by the previous government in February 2024, but as of early 2026 it has not been implemented. A mandatory national register with a target launch of April 2026 has been announced, though detailed implementation guidance has not yet been released. Until legislation is confirmed, existing planning rules apply.
In London, a 90-night annual limit applies to any main home let on a short-term basis without planning permission. Scotland runs a national short-term let licensing scheme and allows control areas where secondary short-term letting is deemed a material change of use. Wales applies local planning controls that vary by area.
The regulatory direction is clearly towards tighter control and registration requirements. Operators should monitor GOV.UK planning guidance and check their local authority's position before operating.
Standard residential or buy-to-let landlord insurance does not cover short-term commercial lets. A specialist policy is required, typically covering buildings and contents, public liability for guest injury or damage, and loss of income for periods when the property cannot be let. If you are operating on a rent-to-rent basis, the landlord's policy does not extend to your activity and you will need a separate business liability policy in your own name.
Yes. Operating through a limited company is increasingly common for serviced accommodation businesses, particularly where multiple properties are involved. The main considerations are Corporation Tax on profits, the extraction of income as salary or dividends, and the administrative costs of running a company. Whether incorporation makes financial sense depends on your profit level, personal income, and longer-term plans. It is worth modelling both structures before committing, as the right answer is not the same for every operator.
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