UK holidays are set to get more expensive in 2026 after the Budget’s “tone-deaf” mansion tax and 2% tax hike on property income, experts have warned.
Chancellor Rachel Reeve’s latest Budget signals a significant shift in the economics of UK holidays, with measures that will raise the underlying cost of running a holiday home.
With the Furnished Holiday Lettings (FHL) regime already abolished, From April 2027, tax on property income will rise by two percentage points, while a new high-value property surcharge, dubbed the mansion tax, will apply to second homes worth over £2 million from April 2028.
In addition, local authorities have been given the power to introduce an overnight visitor levy, raising the prospect of new nightly charges for guests in popular destinations.
For many owners, these changes translate into higher operational costs simply to stand still – costs that are likely to flow into rental pricing.
The government is also exploring new registration requirements for short-term lets, and industry speculation continues around future Energy Performance Certificate (EPC) regulations that could mandate a minimum energy rating of C.
Experts claimed that for holidaymakers, the combined result is an environment where UK breaks may become noticeably more expensive over the next few years.
They said that for property owners, especially those in premium coastal regions, the challenge lies in balancing rising regulatory and tax burdens without compromising the quality and comfort guests expect.
Great British holiday
Kate Allen, Owner at Kingsbridge-based Finest Stays, said: “The Great British Holiday isn’t going anywhere, but its affordability might be.
“This isn’t the correction the sector needed, as margins were already tight. The harsh truth is that the ones who look set to lose out are those guests simply trying to enjoy holidaying here in the UK.
“As for holiday let owners, some regulation will help by weeding out unsafe operators, but other proposals, like EPC requirements for 200-year-old cottages, are completely disconnected from reality.
“Demand for quality UK stays remains strong, but owners will have to work harder, margins will shrink, and only operators delivering real value will thrive.”
Luke James, Tax Director at Sheffield-based Gravitate Accounting, said the measures may shrink the holiday let sector in the UK.
He added: “The pub sector offers a cautionary tale: once taxation and regulation became excessive, closures followed and many venues never returned. A similar squeeze on holiday lets could shrink a sector that’s critically important to local economies, ultimately undermining entire communities the policies aim to protect.
“A 5% SDLT surcharge and speculation over higher council tax for second homes add to mounting pressures on holiday-let owners. With the Furnished Holiday Lettings regime abolished, property income tax rising and possible visitor levies ahead, operators face a sharply higher cost base.
“Ministers frame these reforms as a fairness reset, aimed at curbing speculative ownership and easing local housing shortages.
“But the cumulative impact is significant: existing landlords must absorb higher costs to maintain standards, while new entrants face tougher barriers. The likely outcome is reduced supply, higher prices for guests and more UK travellers looking abroad.”
Tone-deaf
Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, said the mansion tax was “tone-deaf” as it will force holidaymakers overseas.
He added: “This is up there with Cromwell banning the celebration of Christmas. Tone-deaf and spiteful. The lack of forethought from this government is concerning.
“How is forcing holidaymakers overseas consistent with generating UK growth or curbing carbon emissions? Are holiday let owners really the fat cats that the government want to attack or hard working businesses trying to get by?
“Our coastal regions are already amongst the most deprived so we should be doing more to try and encourage tourism.”
Nice not Newquay
Scott Gallacher, Director at Leicester-based Rowley Turton, said he was heading on holiday to France because it is more affordable.
He continued: “The UK holiday sector already struggles with relatively high costs compared with many overseas destinations — and that’s before you factor in our far less predictable (and often colder, wetter) climate.
“Add in last year’s rise in Employer’s NI and now this latest package of tax and regulatory changes, and it’s hard not to see UK staycations becoming increasingly uncompetitive against European alternatives.
“On a personal level, I’m heading to Nice rather than Newquay in February — it will be much warmer, and no more expensive than staying in the UK. That alone says a great deal about where things are heading.
“Rachel Reeves talks about a “Growth Agenda”, but you do start to wonder: if she were actively pursuing an Anti-Growth Agenda, what exactly would she be doing differently?”
Cash machine
Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, said it will have a knock-on effect of hitting the economy of towns across the UK.
She added: “UK staycations in England’s green and pleasant land are about to cost more because the Government keeps treating holiday-let operators like a cash machine. That pressure does not stop with owners. It spills into local jobs, tradespeople, cleaners, cafes and whole high streets that rely on tourism spend to survive.
“It is not just a luxury weekend lost to foreign travel, it is income pulled from communities that have nothing else to fall back on, less footfall and fewer pounds circulating where they are needed most.
“Many of the properties in prime locations are out of the price reach of local people due to wider economic factors, not just a rise in how many are available for short lease.
“Taxing visitors for spending cash in local regions is economic sabotage sanctioned by a Government that has proved its hostility to entrepreneurs propping up failing policy.”
Photo by Heather McKean on Unsplash
