 Furnished
Holiday Let Tax
Owning a holiday let property has many tax
advantages, providing it qualifies as a
'Furnished Holiday Let'. For in depth and
personal tax advice you should always consult a
qualified tax adviser.
However, here you will get a flavour of
Furnished Holiday Let taxation.
Rules for holiday lettings
To make sure your property counts as a holiday
letting, it must be:
- in the UK
- furnished
- available for holiday letting to the
public for at least 140 days a year
- actually let as a holiday let for at
least 70 days a year (and these must be
commercial lets not at cheap rates to
friends and family)
The holiday lets must be (both):
- short term lets of not more than 31 days
- the only lets for at least 210 days (211
days in a leap year)
Other restrictions: You can't
let the property as a holiday let to the same
person for more than 31 days in the year.
However, if you meet all the qualifying tests
for 210 (or 211) days there are no restrictions
on longer lets in the remaining 155 days but
these longer lets do not count as holiday lets.
Providing you are able to continually meet the
above criteria, your Furnished Holiday Let
qualifies to be treated as a business for all
taxes. You will now receive the following tax
treatment for; Income tax, Capital gains tax and
Inheritance tax.
Income Tax
As with buy to let, expenses wholly incurred in
running and managing the property are
deductible, as is interest paid on money
borrowed to purchase
the property. There are also capital allowances
on capital expenditure such as furnishings,
kitchens, bathrooms etc. Importantly, if your
holiday let makes a loss, so running expenses
exceed actual income, then this loss can be
offset against your own personal earnings and
tax. This is a major difference to buy to let
where property income and expenses are kept
separate from personal income.
Capital Gains Tax
From 6th April 2008 your Furnished Holiday Let
can take advantage of the new Entrepreneurs'
Relief. Simply, this means that capital profits
will be taxed at 10% rather than 18% up to a
lifetime cumulative maximum profit figure of £1
million. Any profits in excess of this figure
will be taxed at 18%.
Inheritance Tax
Providing your holiday let property has been
owned for 2 years, and qualifies as a Furnished
Holiday Let, then it should obtain 100% business
property relief and not be included in your
estate on death.
These tax breaks are applicable only if the
property qualifies as a Furnished Holiday Let.
However, these requirements are not particularly
onerous and the consequential tax benefits are
extremely valuable. Unfortunately, many owners
of holiday let properties are not always given
the most efficient tax advice from their
Accountants. If your property qualifies as a
Furnished Holiday Let, based on the criteria
above, then it is treated by the Inland Revenue
as a Furnished Holiday Let for tax purposes. It
is important to stress this to any tax adviser
so your property is not declared simply as a buy
to let.
This information is believed to be
correct at date of publication. Please always
consult a tax specialist for clarification of
your personal situation.
February 2008
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