Choose wisely and your second property can be a goldmine... even if it's inland: These are the locations where it REALLY pays to own a holiday buy-to-let (and the Cotswolds beats Cornwall…)

Prized for its hundreds of sandy beaches, fishing coves and glorious countryside, Cornwall has long been the undisputed champion of staycations and the holiday let market.

Last year, official data revealed the county had the highest numbers of holiday homes (6,080) which attracted 14,230 guests. However, despite these figures, Cornwall is not the most lucrative hotspot for short-term (less than 28 days) buy-to-let landlords. It generates less income than Cumbria, the Lake District and Dorset too.

The highest earning region in 2023 was the Cotswolds, an area which stretches from Stratford-upon-Avon in the north to Swindon in the south, Gloucester to the west and Oxford to the east. Here the average holiday home owner makes £28,500 a year (all figures before tax), according to Sykes Holiday Cottages.

A four-bedroom cottage in a chocolate box village such as Broadway or house in a small market town such as Chipping Campden would make an annual £46,300 in holiday rent.

Its popularity as a quintessentially English destination has been supercharged by well-known faces moving there – from David Cameron, Kate Moss and Elizabeth Hurley to Jilly Cooper and Stella McCartney.

The Cotswolds is an area which stretches from Stratford-upon-Avon in the north to Swindon in the south, Gloucester to the west and Oxford to the east

Maria Stengard-Green who has run Luxury Cotswold Rentals with her husband Nigel since 2010, says the area has always been a favourite retreat for high net worth Londoners but has recently gained popularity among international tourists.

'Americans love the Cotswolds, where they can see all the gorgeous little picturesque villages. We are also getting more Europeans, including Scandinavians and Dutch tourists. We didn't used to get many from the Continent.'

The couple now manage a portfolio of dozens of homes – including those of other landlords and say tourists are willing to pay a premium to stay in a beautiful home.

'It's expensive to stay here but people are willing to pay the rates – many of whom will stay for a whole month to explore the area,' she adds.

Property on their books can go for £55,000 a week in the case of North Lodge Blenheim, a seven-bedroom country house on the gated and private Blenheim Palace Park near Woodstock. The rate includes daily housekeeping and a private chef for two meals a day.

Paul Houghton-Brown, from estate agents Hamptons, concurs and says there has been a shift in the past two years, with buyers now typically from further afield. 'The international market – mainly Americans and Australians – buy Cotswolds property and use the house when they visit the UK with friends and family, then rent it out as a holiday let when they are not here, to generate cash and cover the running costs.

'We are dealing with properties that generate £75,000 a year but some of these homes can be quite expensive to run,' he says.

'British buyers have become more concerned about the high taxation on holiday lets and greater Government restrictions,' he adds.

The towns Stow-on-the-Wold and Bourton-on-the-Water, popular for their romantic honey-coloured Cotswold stone cottages and pretty gardens, are among the most in-demand with holidaymakers. Average revenues reached £42,500 and £36,000 respectively last year, according to the report. The region's year-round appeal also helps improve revenue, says Graham Donoghue, chief executive of Sykes Holiday Cottages. However, properties in the Cotswolds cost nearly twice the national average to buy at £500,311 in February 2024, according to the Land Registry.

Cumbria and the Lake District ranks as the second most lucrative region in Britain for holiday let owners. Demand for holiday homes in Cumbria has 'never been higher,' according to The Holiday Letting Outlook Report 2024.

Homes in the national park bring in £28,200 a year on average, rising to £44,200 for four-bedroom properties. However, the average property is much more affordable than in the Cotswolds. Homes in Westmorland and Furness, the local authority that comprises many of the Lake District's most popular towns, including Windermere, Penrith and Kendal, cost an average of £220,045 in February. This means landlords who let out their second homes to hiking holidaymakers can expect to generate a yield of 12.8 per cent a year on the average property.

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Take the picturesque village of Grasmere, nestled at the foot of spectacular fells and home to William Wordsworth. It's one of Britain's fastest growing regions for holiday rental income. Landlords with homes in the village made 12 per cent more in 2023 than the previous year – equivalent to an extra £4,700 – taking their total annual income to an average of £43,100.

Ambleside, which has become a popular base for exploring the Lake District (see Jeff Prestridge opposite) has also seen one of the largest jumps in income, with holiday lets raking in 12 per cent more at £32,900 in 2023, up from £29,300 the previous year.

The third most profitable holiday rental location is Dorset, famous for dramatic cliffs lining the Jurassic Coast. Here holiday lets earn £27,000 a year on average, while four-bedroom homes attract £38,300 per year.

That means with the average property priced at £354,268, prospective buy-to-let landlords who want to get in on the action can still generate a healthy rental yield. However, they may end up forking out extra in council tax, as Dorset councillors in February approved plans to charge double council tax on second homes. The premium will come into effect on April 1, 2025.

Lagging around £10,000 a year behind the Cotswolds in pre-tax profits, in joint fourth place is Cornwall and the Peak District, where landlords generate an average income of £26,500 every year.

But one surprising outsider is Northumberland which dominates the list of top regions seeing the fastest growth in income, with five of the top ten locations. Landlords in the coastal town of Seahouses saw their incomes rocket by 36 per cent in a year, earning an extra £7,800, to total £29,700.