Whether you pay VAT on a serviced apartment in the UK depends on the length of your stay, the nature of the accommodation, and whether the operator is VAT-registered. For most serviced apartment stays in London — the kind booked through a professional operator for corporate relocation, extended leisure, or Gulf summer visits — VAT at the standard rate of 20% applies. Understanding how it works, when it reduces, and what you can reclaim as a business guest prevents both overpayment and unexpected tax bills.
The Standard Position: 20% VAT on Serviced Accommodation
In the UK, hotel and accommodation services are subject to the standard VAT rate of 20%. This applies to serviced apartments, aparthotels, and short-term furnished lets where the provider is VAT-registered and the accommodation is supplied on a commercial basis with hotel-style services — cleaning, linen, reception, and key management.
Short-term holiday accommodation is always a standard-rated supply at 20% unless very specific exemptions apply. The temporary COVID-era reduced rates (5% and then 12.5%) that applied between July 2020 and March 2022 have not been renewed. From 1 April 2022 the normal VAT rules apply, and VAT is charged at the standard rate.
The practical effect for a guest booking a London serviced apartment through a professional operator: the quoted rate almost certainly includes VAT at 20%. Always confirm whether the quoted nightly or weekly rate is inclusive or exclusive of VAT before comparing rates between providers.
Who Must Charge VAT
Not every serviced apartment operator charges VAT — the obligation arises only when the operator’s taxable turnover exceeds the VAT registration threshold. UK businesses, including hotels, B&Bs, holiday lets, and hostels, must register for VAT when their taxable turnover exceeds the VAT registration threshold. That threshold is currently £90,000 per year. Below this threshold, a landlord or operator is not required to be VAT-registered and may not charge VAT on their accommodation.
In practice, professional serviced apartment operators in London — SACO, Citadines, Leman Locke, Native, Supercity, and similar — are all VAT-registered businesses. Their rates include VAT and they issue VAT receipts. The VAT question is most relevant for smaller independent operators or individual landlords offering furnished short lets where the annual income may be below the registration threshold.
If you operate like a hotel — providing cleaning, linen, check-ins, and guest services — HMRC treats it as taxable business activity, not passive property income. An individual landlord who provides these services to short-term guests is operating in the same category as a hotel for VAT purposes, regardless of the scale.
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The Long-Stay Reduced Value Rule: Stays Over 28 Nights
The most significant VAT advantage available to serviced apartment guests is the reduced value rule for stays over 28 nights. From the 29th night onwards, the VAT rate reduces to 4% per night under HMRC’s Reduced Value Rule. This rule does not apply to hotels — it is unique to serviced apartments. The reduced rate applies only to continuous stays.
This rule works as follows. For nights 1 to 28, the full accommodation charge is subject to 20% VAT. From night 29 onward, the VAT is calculated on only 20% of the daily accommodation charge rather than the full amount — effectively reducing the VAT burden on the accommodation element to approximately 4% of the daily rate.
The practical implication for corporate and extended stays is significant. A guest staying for three months in a serviced apartment at £150 per night:
- Nights 1 to 28: 28 × £150 = £4,200 — VAT at 20% = £840
- Nights 29 to 90: 62 × £150 = £9,300 — VAT calculated on 20% of each night’s rate (i.e. 20% of £30) = £186
The total VAT on a 90-night stay is £1,026 rather than £2,700 — a saving of over £1,670 on the same accommodation billed at the full rate throughout. By understanding how VAT applies to different types of serviced apartments and taking advantage of reduced rates on long stays, companies can significantly optimise their accommodation budgets.
Important condition: the reduced rate applies only to continuous stays at the same property. Breaking a stay — leaving and returning — resets the clock. Night 29 must genuinely be the 29th consecutive night in the same accommodation for the reduced value rule to apply.
What the VAT Covers: Accommodation Versus Services
Where a serviced apartment operator charges for additional services alongside accommodation — daily housekeeping, laundry, parking, meals, or meeting room hire — VAT applies separately to each component at the appropriate rate. The accommodation rate and the reduced value rule apply specifically to the accommodation charge; ancillary services are charged at the standard 20% VAT throughout the stay regardless of length.
Operators are required to itemise these charges clearly on their invoices. For corporate guests reclaiming VAT through their business, it is important that the invoice separately identifies the accommodation charge and any service charges, as the reclaimable amounts are calculated differently.
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VAT Reclaim for Business Guests
Business guests booking serviced apartments on behalf of their employer or their own VAT-registered business can reclaim the input VAT on accommodation as a legitimate business expense. To reclaim, you need:
- A valid VAT invoice from the accommodation provider showing their VAT registration number, the accommodation dates, the rate charged, and the VAT amount separately identified
- Evidence that the stay was genuinely for business purposes
For corporate stays, most professional serviced apartment operators issue VAT-compliant invoices as standard. Some operators offer consolidated monthly invoicing for corporate clients with multiple employees in residence, which simplifies the reclaim process for large organisations.
VAT and the Abolished Furnished Holiday Lettings Regime
A significant change in the tax landscape for serviced accommodation operators took effect from April 2025. The Furnished Holiday Lettings tax regime was abolished from 6 April 2025. Serviced accommodation income is now treated as standard UK property income with no special tax advantages. Section 24 finance cost restrictions apply to individual SA landlords in the same way as all other residential landlords.
This change affects operators, not guests. The VAT treatment of the accommodation itself — 20% standard rate, with the reduced value rule applying from night 29 — is not affected by the abolition of the FHL regime. What changed is the income tax and capital gains tax treatment available to operators, not the VAT that guests pay.
For HMRC guidance on the reduced value rule for long-stay accommodation, check: GOV.UK — VAT reduced value rule for accommodation
What This Means for Different Types of Guests
Corporate guests and business travellers. The 20% VAT is reclaimable as input tax against business VAT. The reduced value rule for stays over 28 nights makes extended corporate stays significantly more cost-efficient. Request a VAT invoice on arrival and confirm the operator’s VAT registration number.
Individual leisure guests. VAT is not reclaimable and represents a genuine cost. For stays under 28 nights, VAT at 20% is simply included in the quoted rate. For longer stays, the reduced value rule applies but the saving accumulates within the nightly rate — you pay less VAT per night from night 29 onward.
Gulf and international visitors on extended summer stays. A six-week or two-month London serviced apartment stay qualifies for the reduced value rule from day 29. The longer the stay, the more significant the VAT saving relative to a hotel of comparable quality.
Company bookings. Where the booking is made in the company’s name rather than an individual’s, the company can reclaim the full input VAT through its quarterly VAT return. This makes serviced apartments a more tax-efficient corporate accommodation choice than hotels for business guests whose companies are VAT-registered.
For HMRC VAT notice 709/3 on hotels and holiday accommodation, check: GOV.UK — hotels and holiday accommodation VAT notice
Conclusion
VAT on a London serviced apartment is 20% for stays up to 28 nights where the operator is VAT-registered. From night 29 of a continuous stay, the reduced value rule reduces the effective VAT to approximately 4% of the nightly rate — a significant saving on extended corporate and long-stay bookings. Business guests can reclaim the input VAT against their business VAT. The abolition of the Furnished Holiday Lettings regime in April 2025 changed the tax position for operators but did not affect the VAT treatment for guests.
Frequently Asked Questions
Do you pay VAT on a serviced apartment in the UK?
Yes — serviced apartments provided by VAT-registered operators are subject to 20% VAT, the same rate as hotels. Not every individual landlord offering short-term furnished lets will be VAT-registered if their annual turnover is below £90,000. Professional serviced apartment operators in London are almost always VAT-registered and include VAT in their quoted rates.
What is the VAT reduced value rule for serviced apartments?
From the 29th consecutive night in the same serviced apartment, VAT is calculated on only 20% of the accommodation charge rather than the full amount — reducing the effective VAT rate to approximately 4% of the nightly rate. This rule applies uniquely to serviced apartments rather than hotels, and only to continuous stays. Breaking a stay and returning resets the 28-night count.
Can I reclaim VAT on a serviced apartment for business?
Yes — business guests whose employers or businesses are VAT-registered can reclaim the input VAT on accommodation as a legitimate business expense. A valid VAT invoice from the operator is required, showing the VAT registration number, stay dates, rate, and VAT amount separately identified. Most professional serviced apartment operators issue compliant VAT invoices as standard.
Does VAT apply to serviced apartments used for holiday purposes?
Yes — short-term holiday accommodation is a standard-rated VAT supply at 20%. Holiday guests cannot reclaim VAT. The reduced value rule for stays over 28 consecutive nights applies to holiday guests as well as business guests, reducing the effective VAT rate from night 29 onward.
