Tax Rules on Holiday Homes

30th July 2018

So, you enjoyed your break in a holiday cottage to the extent that you’re considering investing to make money from a similar property of your own. Jason Jones has this advice because a Furnished Holiday Let is a special type of property business where very different tax rules apply.

 

These Lets can be seen as a ‘halfway house’ between ordinary buy-to-let property like an hotel or B&B.

 

A Furnished Holiday Let requires the following conditions:

 

  • Furniture for the occupiers to use.
  • Located in the UK or in the European Economic Area.
  • Available for letting to the general public for at least 210 days in the tax year.
  • Was actually let commercially as holiday accommodation for 105 days or more.
  • if occupied by the same long-term tenants for more than 31 days, these periods must total no more than 155 days.

 

The rules can be relaxed if there are one or two years where it was not possible to let the property for 105 days. If the condition was met previously it can still be treated as a Furnished Holiday Let.

 

If you have more than one property which is used as furnished holiday accommodation, you can take an average of the days they were actually let to determine if the 105-day rule is met.

 

Capital allowances can be claimed on furniture and equipment used in the holiday accommodation as well as integral electrics, heating and plumbing systems.  Up to £200,000 annually can be written off 100% against profits.

 

Reliefs are available to reduce or defer any Capital Gains Tax (CGT) when the Furnished Holiday Let is sold. This includes Roll-Over Relief, Gift Relief and Entrepreneurs’ Relief which can reduce the CGT payable for higher rate taxpayers from 28% to 10%.

 

Profits from Furnished Holiday Lets are earnings for pension purposes and can allow for more tax allowable pension contributions to be made.

 

The recent restriction in tax relief on mortgage interest paid by residential landlords does not apply to Furnished Holiday Lets and the full amount of any interest paid can be deducted from profits.

 

To gain these tax advantages, it is vital to ensure that the qualifying conditions are fully met and the correct boxes are completed in the Self-Assessment Tax Return.

Disclaimer - All information in this post was correct at time of writing.
Other Blogs
Shamus Chaplin
20th February 2024 Update on Double-Cab Pick-Ups: HMRC are reversing

Update on Double-Cab Pick-Ups   On the 12th February 2024, HMRC announced that their interpretation of the legislation had changed regarding the favourable tax treatment of pick-up trucks from 1st July 2024. However, after consulting farmers, construction workers and other industry professionals they have now reversed their decision!     Current Position HMRC interprets the…

Ian Piper
19th February 2024 SME Ely Business Awards 2024: 1 Week Left To Enter!

There is just one week remaining to enter the SME Ely Business Awards for 2024!   Celebrate your business’ achievements and be in with a chance of winning by entering today. Entries close on Thursday 26th February 2024 at 3pm. Find Out More Click here to find out more about the SME Ely Business Awards…

Maddie Milner
16th February 2024 Companies House changes from 4th March 2024

,Find out more about the upcoming Companies House changes from 4th March 2024 here.     Registered email addresses One of the main changes from the 4th March 2024 are Companies House require all companies to provide a registered email address which will be collected within your companies next Confirmation Statement.   New companies will…

Shamus Chaplin
15th February 2024 Double-cab pick-ups: End of the road?

*An update on this has since been posted. Click here to read the updated information.*     The tax treatment of double-cab pick-up trucks is set to change with effect from 1st July 2024, and will see the vehicles lose their status as ‘commercial vehicles’ when it comes to company car taxation. This could see…

Nick Edgley
12th February 2024 End Of Year Tax Planning: Pre 5 April

Have you thought about your end of year tax planning?   As another tax year end comes around we turn our thoughts to any tax planning that can be undertaken before the 5 April.   You can find a link to our general tax planning guide here Tax Year End Planning Feb 2024, as a reminder…

Ian Piper
9th February 2024 Spring Budget: The SME wish-list?

With the 6th March Budget just around the corner, many SME business owners are beginning to wonder what’s in Mr Hunt’s red ministerial box, which got us thinking, ‘what might the SME wish-list look like in the ideal world?’   There are 2 reasons to be a little more optimistic than usual this time around:…