Short Term vs Long Term Letting: What Is the Difference?

Deciding how to let your property is one of the most important decisions you’ll make as a landlord. The choice between short term and long term letting shapes everything from your rental income to how much time you spend managing your investment.

Short-term and long-term lets are separated by five core differences: income, regulations, flexibility, tax, and effort. Understanding these fundamentals will help you determine which option aligns with your financial and lifestyle goals.

Short-term letting involves rentals lasting less than 90 days, while long-term letting includes leases of six months or more. In practical terms, short term lets serve holidaymakers, business travellers, and those in temporary relocations, while long term rentals become someone’s primary residence under formal tenancy agreements.

If you own a property and are considering the best rental option, you may wonder whether to let it out on a traditional long-term tenancy or explore short letting through platforms like Airbnb or Booking.com. Both can generate income and have their benefits and drawbacks, making it essential to gather the right information upfront to make an informed choice.

A short term let is a property rented for stays from one night up to less than 90 days, primarily serving holidaymakers, business travellers, digital nomads, and those needing temporary accommodation. Homeowners can host guests themselves or use a short-let property manager such as Pass the Keys.

Bookings are typically managed via platforms like Airbnb, Booking.com, and Vrbo, alongside direct bookings through specialist managers. Properties are fully furnished and equipped with linen, Wi-Fi, and kitchenware, with pricing set per night and adjusted based on seasonal demand and local events.

In some UK destinations, these properties are often called holiday lets or serviced accommodation. A 2-bed flat in Edinburgh’s Old Town, for example, might command £200-£300 per night during the August Festival, potentially earning more in a single month than an entire quarter of standard rent.

Short term lets provide landlords with greater flexibility as they can choose when to use their property for personal use or leave it vacant, unlike long term tenancies which require commitment to a tenant. Here are the key benefits:

• Higher earning potential: Short-term lets can generate significantly higher revenue, especially in popular or high-demand areas, but they require more involvement or professional management.
• Dynamic pricing: Landlords of short term rentals can adjust their pricing based on demand, allowing them to maximise income during peak seasons and lower prices during off-peak times. Short term rentals often command premium rates during peak seasons—think July-August in coastal Cornwall or December in central London—unlike long term rentals which have fixed rates.
• Owner flexibility: You can block dates for personal use, family visits, or refurbishment windows, something impossible with a 12-month AST.
• Proactive maintenance and less wear: Professional short term management involves inspections and frequent cleaning after every stay, catching issues like leaks or appliance faults before they become costly problems. Contrary to common belief, short term lets can experience less cumulative wear and tear than long-term lets, as tenants in long-term lets may not maintain the property regularly.
• Reduced problem tenants risk: Guests have no security of tenure, and non-payment or anti-social behaviour is addressed quickly through platform processes rather than lengthy legal proceedings.

Pass the Keys’ local teams enhance these advantages through professional pricing algorithms, multi-platform marketing, and 24/7 guest communication support.

Short term rentals can experience significant income variability, affected by seasonality and occupancy rates. Some locations might hit 90%+ occupancy in August but drop to 40-50% in January.

• Higher operating costs: In many areas, platform fees run 14-18% of bookings. Short term rentals typically incur management fees ranging from 15-25%, while long term buy-to-let management fees are generally lower, around 8-10%.
• Intensive management: Managing a short term let requires more time and effort due to frequent tenant turnover, cleaning, and maintenance between stays. Guest inquiries, key exchanges, and emergency issues demand constant attention if self-managing.
• Mortgage and lease restrictions: Some lenders and leasehold agreements restrict holiday letting, particularly in London apartments and new-build developments.

A long term let is a property rented as someone’s main home, typically on a 6 or 12-month tenancy agreement that often rolls into a periodic tenancy. In England and Wales, this usually means an Assured Shorthold Tenancy (AST), while Scotland uses Private Residential Tenancies (PRTs) with stronger tenant security but no fixed end date.

Typical tenants include professionals, families, students, and retirees seeking stability, particularly in commuter belts around major cities or non-tourist towns. Properties are usually let unfurnished or part-furnished, with tenants setting up their own utility bills and council tax accounts.

Legal obligations include deposit protection via approved schemes, gas safety certificates, and meeting EPC minimum standards.

Long term rentals provide consistent, predictable income month after month, making it easier for landlords to budget and manage their finances throughout the year. The income from long term rentals is generally fixed and agreed upon in advance.

• Predictable steady income: Long term lets typically experience fewer void periods, providing more stability and reliable income, which can be beneficial for landlords who rely on rental earnings to cover mortgage payments or living costs.
• Lower running costs: There’s no need for constant advertising, cleaning, linen, or restocking. Tenants in long term lets typically pay their own utility bills and council tax.
• Less involvement: Once a tenant is settled in a long term let, the management is largely passive, requiring only occasional maintenance. Once a letting agent is instructed, your input is limited to periodic inspections and major decisions.
• Suits non-tourist areas: In towns or rural locations without strong visitor demand, long term letting may be the better option.

Long term letting generally has lower rental yields compared to short term lets due to monthly rates being lower than cumulative nightly rates. Here are the key challenges:

• Less flexibility: Once a long term tenancy agreement is signed, you cannot take the property back for personal use or sale without following statutory processes and notice periods, leading to less flexibility for owners.
• Tenant risks: Long term tenants can pose risks such as rent arrears, anti-social behaviour, or property neglect, which can take time and legal effort to resolve. Evicting a problematic long term tenant can be a lengthy and costly process, often requiring legal assistance and taking several months to resolve.
• Slower market response: Rent can usually only be reviewed at set intervals, often annually, so you can’t rapidly adjust to market rents when local values rise.
• Cumulative wear: Long term rentals can lead to increased wear and tear on the property due to prolonged use of amenities over extended periods, requiring refurbishments between tenancies every 3-5 years.
• Evolving compliance: Staying updated with frequent law changes, including potential reforms to Section 21 evictions, adds administrative burden for long term landlords.

Understanding these five key differences helps clarify which rental strategy suits your property and goals:

Short-term lets can generate significantly higher revenue, especially in popular or high-demand areas, but they require more involvement or professional management.

Income with long lets is predictable as long as you have a good stable tenant. Short lets tend to follow a bell curve pattern. Revenue peaks during high demand seasons and other major events and can go quieter during other periods. This is because of the fluctuating occupancy rates and nightly rates which vary throughout the year. In some destinations hosts/ landlords can earn the majority of their annual income in peak season.

Short-term letting has historically provided greater tax breaks and incentives over long-term letting. Unfortunately, following changes in tax legislation from April 2025, short and long term lets will now be taxed in the same way. If you short-term let a property, you would be liable for the council tax. However, short-term lets can obtain a ‘business rating’, allowing them not to pay any council tax. Most short-term lets will qualify for small business rates relief, meaning no business rates or council tax payable.

Short-term lets are subject to VAT if the rents received from short-term letting exceed £90,000 in any 12 month period. It is, however, possible to register under the ‘flat rate’ VAT scheme, reducing VAT payable to only 10.5%. Long-term lets in ‘off seasons’ (October to Easter) are generally not subject to VAT (source: https://gozeal.co.uk)

Long-term lets offer stability with consistent income and fewer void periods, suitable for landlords seeking reliable earnings. Short-term lets provide flexibility to use the property personally and adjust pricing dynamically but face income variability due to fluctuating occupancy.

We know that the market conditions at the moment, with the budget uncertainty, buyers leading to the first annual decline in sales of property in two years. There are 7% more homes on the market, and buyer demand is down by 8% (source: Zoopla), which means short lets could also be a viable option whilst the property is on the market.

Short lets have traditionally been thought to cause more wear and tear on a property because of the higher footfall, but this is not always the case. Yes, there may be more guests, but equally, you have someone dealing with changeovers and regularly cleaning and spot checking the property, vs a long let when there is no control of this.

With the marketplace ever changing, keeping up to date on what is happening across the letting landscape is more important than ever.

Long let regulations

The long-term market has the Renter Rights Reform Bill coming into effect for long-term lets. The Renters’ Rights Act 2025 changes Section 21 and brings tighter controls on rent and possession(refers to Section 21 of the Housing Act 1988 in England and Wales). Section 21 allowed landlords to evict tenants without having to give a reason, once the fixed term had ended, as long as they followed the correct notice procedure (typically giving 2 months’ notice).It was mainly used when looking to sell the property, if you wanted to move back in or ending tenancies with problematic tenants. It basically allowed landlords to maintain some control of their assets with minimal legal risk.

Many landlords see the changes to Section 21 as a backwards step for landlords. It means it will be slower and harder for landlords to remove tenants and will likely increase court involvement. This is another blow to the long-term market after many tax changes and EPC requirements.

The good news is that short-term letting sits outside of the scope.

Short let regulations

Short-term lets (like Airbnb-style stays) do not fall under the Renter Rights Reform Bill legislation, because guests are licensees, not tenants, meaning they don’t acquire the legal rights or protections the Bill creates.

You will, however, need to consider short-let regulations in certain areas, different regulations such as the 90-day rule in London or the licensing in other locations. A credible property management company will be able to advise on this in your specific area and, in most cases, be able to help when it comes to licensing. You also need to consider building management freeholders, leases and local restrictions with some councils. There are also safety, fire and insurance obligations to consider.

Long-term letting is more hands-off after tenant move-in, with rent collection and occasional maintenance. Short-term letting demands ongoing operational management: cleaning, guest communication, check-ins, marketing, and maintenance.

Many landlords use professional management companies like Pass the Keys to handle these tasks, minimising landlord time commitment in both models.

There’s no universal “right path.” The informed choice depends on location, property type, financial goals, risk tolerance, and time available for management.

Ask yourself these key factors: Is your area a tourist or business destination with high demand? Do you need stable income predictability? Do you want personal use during summer months or long periods of the year?

A blended approach of short term lets during peak seasons, and mid-term lets over winter can work for many landlords but requires strategic planning. Recent years have seen more owners exploring this model.

Before you decide, run realistic financial scenarios for both models. Include voids, tax implications, and all operating expenses rather than relying on headline nightly rates or monthly rents alone. The certain amount of money you expect might differ significantly once costs are factored in.

Contact Pass the Keys today for a personalised appraisal of your property’s short term letting potential.