In Westminster, London's 90-night cap inverts the usual after-costs arithmetic. A 3-bed house grosses less as a holiday let than it does as a buy-to-let before any costs are paid, and the gap widens once Airbnb fees, specialist insurance and host-paid utilities are deducted. With the Furnished Holiday Lettings tax regime abolished from April 2025, holiday lets and buy-to-let are now taxed equivalently, which makes this after-costs comparison the decisive lens rather than a tax-driven one.
This article covers both a 3-bed house and a 2-bed apartment because the cost structures differ in important ways. Apartments come in at a lower entry price but add a service charge that houses do not pay, and the rental ratio between the two property types is not the same. The combined picture is what matters.
3-Bed House: Buy-to-Let Nets 1.3%, Holiday Let Nets 0.1%
The median 3-bed house in Westminster sits at about £3.28m, which is roughly 1195.3% above the UK national median of about £254,000. The London 90-night rule, set by the Deregulation Act 2015, caps holiday letting at 90 nights per year unless the owner secures planning permission for change of use. Within that cap, gross holiday let revenue lands at about £30,000, while a tenanted buy-to-let on the same property generates about £62,000 in vacancy-adjusted rent. The buy-to-let column starts ahead before a single cost is paid.
| Holiday let | Buy-to-let | |
|---|---|---|
| Property price | £3.28m | £3.28m |
| Gross revenue | £30,000 | £62,000 |
| Airbnb fees (15.5%) | £4,600 | — |
| Rental management | — | £6,400 |
| Insurance | £7,400 | £3,300 |
| Maintenance | £12,000 | £12,000 |
| Utilities | £2,100 | £260 |
| Council tax | £16,000 | £16,000 |
| Holiday let tax | — | — |
| Total costs | £26,000 | £20,000 |
| Net income | £3,700 | £42,000 |
| Net yield | 0.1% | 1.3% |
Council tax in the table applies the modelled property-tax rate to the sale price. In practice, on a tenanted buy-to-let the tenant pays council tax directly, so the line item is zero for the investor outside void periods. A holiday let registered for business rates often qualifies for Small Business Rate Relief and also pays zero. Treat the figure shown as an upper bound rather than a typical annual bill.
The 90-Night Cap, Airbnb Fees and Specialist Insurance Explain the Gap
The biggest line separating the two columns is the 90-night cap itself, which limits gross revenue before any cost discussion begins. Even at 100% occupancy across the available window, a 3-bed Westminster holiday let tops out at around £39,000, well short of the about £62,000 a buy-to-let collects across a full year of tenanted occupancy. Implied break-even occupancy on the holiday let side comes in at 160%; a figure above 100% simply means no occupancy assumption can close the gap while the cap binds.
The cost lines compound the disadvantage. Airbnb fees of about £4,600 a year are levied at 15.5% of gross revenue under the host-only fee model, while a buy-to-let pays no platform fee at all. Other channels charge differently: Vrbo lands at around 5%, Booking.com at roughly 15%, and direct bookings at zero, but Airbnb's reach makes it the default for most London hosts. Specialist holiday let insurance at about £7,400 runs more than double the about £3,300 a buy-to-let landlord pays, because guest turnover, contents cover and short-stay liability all push premiums up. Maintenance for short stays at about £12,000 sits well above the about £10,000 buy-to-let figure, because the holiday let number includes furnishing replacement that a tenanted property does not face. Utilities at about £2,100 are also the host's problem on a holiday let, where buy-to-let tenants pay their own bills directly.
2-Bed Apartment: A Cheaper Entry Price but a Service Charge to Carry
The median 2-bed apartment in Westminster sits at about £863,000, well below the about £3.28m entry price for a 3-bed house. Apartments dominate the Westminster stock and the rental market reflects that depth. The cost structure looks similar to the house but adds one major line: the service charge, which covers building maintenance, lift servicing, communal lighting, concierge in many prime blocks, and the building's own insurance. Because it is a property-level cost paid to the freeholder or management company, it applies regardless of whether the flat is let on a holiday or buy-to-let basis.
| Holiday let | Buy-to-let | |
|---|---|---|
| Property price | £863,000 | £863,000 |
| Gross revenue | £18,000 | £40,000 |
| Airbnb fees (15.5%) | £2,900 | — |
| Rental management | — | £4,000 |
| Insurance | £2,200 | £920 |
| Maintenance | £4,000 | £2,700 |
| Utilities | £1,500 | £150 |
| Council tax | £4,300 | £4,300 |
| Holiday let tax | — | — |
| Service charge | £5,200 | £5,200 |
| Total costs | £16,000 | £13,000 |
| Net income | £2,700 | £27,000 |
| Net yield | 0.3% | 3.1% |
Service charges in prime central London apartments vary enormously, from a few thousand pounds in walk-up blocks to twenty thousand or more in concierge-served buildings with leisure facilities. The figure shown is a market median; for any specific building, the management pack will quote the actual current charge.
House vs Apartment: The Comparison Tightens but the 90-Night Cap Still Decides It
The apartment's cheaper entry price of about £863,000 compresses the denominator on every yield calculation, which lifts the apartment's net yield numbers above the house on both rental routes. On a buy-to-let basis, the apartment runs at 3.1% versus 1.3% for the house. On a holiday let basis, the apartment runs at 0.3% versus 0.1% for the house. In both columns, the smaller property delivers the higher net yield on either rental route.
The service charge is the cost that gets back some of that ground for houses. Adding about £5,200 to the apartment cost stack on both rental routes is enough to make the buy-to-let comparison closer than the headline price difference suggests, and the holiday let route still loses to buy-to-let inside the apartment column for the same reason it loses inside the house column: the 90-night cap limits gross revenue before any cost discussion is relevant. The investor question is therefore not whether holiday let beats buy-to-let in Westminster, because it does not, but whether the apartment's lower capital outlay outweighs the service charge drag and the ongoing freeholder relationship a leasehold flat brings. That answer depends heavily on the specific building.
The Gross Break-Even Floor Sits Above 100% Occupancy
Break-even occupancy of 160% on the 3-bed house is the level at which holiday let gross revenue would match buy-to-let gross rent, before any costs. With the 90-night cap limiting available nights to 90 a year, no real-world occupancy can clear that bar. Westminster's market median holiday let occupancy of 77% reflects genuine tourist demand, but it is applied against a 90-night window rather than the roughly 330 nights available in unrestricted markets. Demand is not the limiting factor in Westminster; the cap is.
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Hiring a Letting Agent Drops the Holiday Let Net Yield Further
The cost tables above assume self-management on the holiday let side, the right starting assumption for an investor pricing the opportunity rather than budgeting a hands-off operation. London holiday let agents typically charge around 18% of gross revenue for full-service management, which on a 3-bed Westminster house adds roughly £5,400 a year on top of the costs already shown. Adding that line lifts total holiday let costs to about £32,000 and drops the holiday let net yield to -0.1%.
For a buy-to-let, the table already assumes a managing agent at typically 10% of rent collected, because agent-managed is the default route in prime central London. Self-management on the buy-to-let side would add about £6,400 back to the upshot, but the practical reality for non-resident or time-poor owners is that an agent handles tenant find, compliance and rent collection. Compliance alone is a real workload in London: deposit protection, gas safety, electrical safety, EPC, the right-to-rent check, and selective licensing in some boroughs combine to make self-management a part-time job rather than a free option.
Tax Treatment Is Now Equivalent After the FHL Abolition
The Furnished Holiday Lettings regime was abolished from 6 April 2025. Holiday lets and buy-to-let property income are now taxed under the same rules, which means the historic advantages of FHL status (full mortgage interest relief, capital allowances on furnishings, business asset disposal relief, and pension-relevant earnings) no longer apply to new operations. Mortgage interest is now restricted to a basic rate tax credit for both rental routes, capital allowances on furnishings inside dwelling houses are largely unavailable, and disposal of either property type now sits inside the residential capital gains tax framework with the higher CGT rates that apply to second homes.
Stamp duty land tax on a second home or buy-to-let purchase carries a 5 percentage point surcharge on top of the standard residential bands across all of England. At Westminster price levels, that surcharge is large enough to belong in the entry decision rather than sitting as a routine cost line. A solicitor will quote the exact figure for any specific transaction. Explore rental data in the dashboard to test different bedroom counts and price assumptions for your own scenario, and review the data sources and market score methodology for context on how these figures are built. After All Costs, Bromley's Holiday Let Loses to Buy-to-Let and After All Costs, Westminster Holiday Lets Trail Buy-to-Let cover related questions for Westminster investors.
Data reflects market conditions as of May 2026.
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This information is for educational purposes only and should not be considered financial or legal advice. Regulations and market conditions change frequently. Verify current rules with local authorities before making investment decisions.
Methodology and Assumptions
Defaults used in the figures above. All inputs are adjustable in the dashboard.
How available nights are determined
Available nights default to 330 per year, reflecting an active operator with minimal blocked time. Where local regulations cap whole-home short-term lets (for example London at 90 nights, New South Wales at 180), the cap is applied. In markets where short-term rental requires owner-occupancy or is otherwise prohibited for investment properties, available nights drop to zero.
How occupancy is measured
The percentage of available nights that get booked, drawn from market data. A property listed for 200 nights with 100 bookings shows 50% occupancy. Adjustable in the dashboard.
Long-term rental management default
Includes a 10% letting agent fee, the standard arrangement for UK buy-to-let investors who use a managing agent. Self-managed landlords can adjust this to zero in the dashboard.
Short-term rental management default
Set to self-managed (zero management fee) by default, the most common arrangement for individual investors. Hiring a professional manager typically costs around 18% of gross revenue and reduces net yield proportionally. Toggle in the dashboard.
How property tax is calculated
Council tax in the UK is typically paid by the tenant for long-term rentals, so it is excluded from buy-to-let costs. Holiday lets are usually assessed as business rates and may qualify for Small Business Rate Relief, often reducing this to zero.
Local regulations
Check state, council, and HOA rules before investing; these change frequently. The regulations summary in this article reflects the latest data we hold. Always verify the live position with the local authority.
Sampling and data sources
Short-term rental yield figures reflect properties currently listed on short-term rental platforms. In high-tourism markets, listings tend to concentrate in central postcodes, which can pull city-median yields above what residential areas of the same city would achieve. Yields for any specific suburb may differ significantly from the city-wide median.
For metric definitions and broader methodology, see the About page.