Holiday home owners should make sure they are not missing out on valuable tax reliefs.
Francesca Hutcheson, tax director here at Dyke Yaxley Chartered Accountants, in Old Potts Way, Shrewsbury, said it was possible to make owning a holiday home add up from a tax point of view, but there were conditions that needed to be met.
“For your holiday home to qualify for tax benefits, it needs to be open to guests for at least 210 days a year, and it has to be let for more than 105 days a year. Guests cannot stay for more than 31 days, and you’ll need to charge the same market value as similar holiday homes in the area.”
Francesca said residential property that is primarily used for short-term lettings could benefit from attractive tax breaks under the furnished holiday lets (FHL) rules.
“Furnished holiday lets are protected from the Government’s decision to limit mortgage interest relief for buy-to-let properties. And they could also qualify for a number of Capital Gains Tax exemptions and reliefs for which the normal buy-to-let properties would not be eligible.”
Francesca said the most significant benefit is the ability to claim Entrepreneur’s Relief on the future sale of the property, potentially reducing any Capital Gains Tax due from 28% to just 10%.
“Business rates will be chargeable on a furnished holiday let, but they are generally lower than any council tax on a second home. You will though face the higher rate of stamp duty land tax on the initial purchase of the property, whether it’s a holiday let or a buy-to-let property.
“Accommodation can only qualify as a furnished holiday let if it passes a number of conditions relating to the occupancy, availability and lettings of the property. But it is still possible to enjoy some benefit from the property, as long as those conditions have been met.
“Of course, you will need to consider how you will manage the property and the process of renting it out, but online portals such as Airbnb have now reduced the administration required and made life a lot easier for property owners.”