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.



 
Other items in Blogs
 
Fiona Mann
22nd July 2019 Exam Success – World Beating Results!

  We’ve had some extraordinary exam results over the last few days – staff at Whiting & Partners have excelled themselves. Luke Bacon from St Ives office has achieved an outstanding result of 99% for the Financial Accounting and Reporting exam – coming joint first in the world.  This result has been recognised by the…

Read More »

Matilda Mawson
19th July 2019 Changes to Entrepreneurs Relief from 6 April 2019

Entrepreneurs’ relief allows a reduced rate of capital gains tax on disposals of all or part of your business assets. The reduced tax rate is 10% on up to £10 million of lifetime gains. There have been a number of significant changes to entrepreneurs’ relief in the last year, tightening the rules on qualifying conditions…

Read More »

Ernesta Petkeviciute
19th July 2019 New SRA accounting rules – what’s changing?

The current Accounts Rules are made up of over 40 detailed requirements, making it difficult for firms to fully understand what is required of them, as well as giving firms no flexibility to adapt them to their own practices and decide how best to look after client’s money.   The new rules coming into effect…

Read More »

Vanessa Pearson
15th July 2019 IR35: private sector off-payroll rules for contractors

This week HMRC have published draft legislation that will affect private sector personal services companies (PSCs)  from 6 April 2020. PSC’s supplying services to medium or large-sized organisations will no longer decide if they are employed or self-employed, the end engager will assess this. If caught by these rules, known as IR35, employment taxes and…

Read More »

Paul Jefferson
15th July 2019 Company car tax changes – Government will remove BIK company car tax on Electric Vehicles from 2020/21

The government has provided positive news for Company car drivers announcing that a pure electric vehicle (EV) will no longer pay benefit-in-kind (BIK) tax in 2020/21 following a review which looks set to boost sales of emissions-free cars. HM Treasury’s response to its review of the fallout from the roll-out of the Worldwide Harmonised Light…

Read More »

Barbara Nicholas
9th July 2019 31 July: Can you elect to reduce your tax payment?

Most individuals who are required to prepare and submit a self-assessment tax return to HM Revenue & Customs in each tax year should now be preparing for their next half-yearly tax payment which is due by July 31.   This tax is the second payment-on-account for the 2018/19 tax year. It is automatically calculated as…

Read More »