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Holiday let income has overtaken earnings from buy-to-lets for the first time, according to HM Revenue & Customs data.
The average holiday let generates £15,600 a year from renters, while the average buy-to-let garners £13,400 - making holiday lets likely earn 14 per cent more yearly.
The figures - for the 2020-21 tax year - show income from holiday let rentals gained 15 per cent in the year, while earnings from buy-to-lets dropped slightly from £13,800 a year in 2019-20.
Experts at London letting agents Hamptons, who carried out the research, explained holiday lets profits are on the rise for two reasons:
Although holiday lets look more lucrative on paper, running one costs more than renting out a buy-to-let.
The main difference between the costs is with a holiday let, the owner bears all the property running costs, whereas a buy-to-let tenant pays for the utilities and council tax.
Hamptons says holiday let owners spend 43 per cent of the property’s income on running costs, compared to 31 per cent for buy-to-let landlords - leaving both owners with a similar amount in the bank at the end of the year.
Holiday lets are also more time-consuming as owners must continually market the property to attract holidaymakers.
So, are landlords tempted to earn more money by switching properties from buy-to-let to holiday lets?
The data from HMRC suggests not.
Over the past ten years, the number of holiday-let landlords has increased by nearly 50 per cent, from 46,000 to 63,000, but only 1.5 per cent of holiday-let landlords also rent out buy-to-lets. The rise in numbers is a minuscule 0.2 per cent in a decade.
Anyone can rent a home to holidaymakers, but owners must abide by some strict rules to gain holiday let tax status.
A holiday let is a furnished, self-catering property generally let for less than a month at a time.
Qualifying holiday lets can claim tax reliefs unavailable to buy-to-let landlords.
Providing a holiday let meets qualification thresholds, owners can claim business rates instead of paying council tax. Doing so can reduce payments to the local council to zero if Small Business Rate Relief is applied.
England, Scotland and Wales each have separate qualifying rules. Those for England are:
The qualifying rules come with some conditions:
Any stays by owners or their family and friends do not count towards these totals.

Source: HMRC and Hamptons
No rule stops a property owner from renting a home as a holiday let and a buy-to-let during the same tax year.
Giving a holiday let tenant a six-month contract triggers the property to be treated as a buy-to-let. Also, a holiday let rented out for part of a year is unlikely to meet the qualification thresholds for tax relief.
HMRC accounts for this with more special rules.
In reverse, a buy-to-let retains the classification unless the time the property is let to holidaymakers meets the qualification rules.