Financial Services > Investments > Buy to let > Tax advantages for holiday lets

Tax advantages for holiday lets

There are some great tax advantages for holiday lets. The Inland Revenue classes holiday lets as a business and not as investment income (unearned income) as with other types of letting. However, there are some important rules you have to follow to qualify. For example, your property must be available for letting for a minimum of 140 days a year and you must have actually let it for a minimum of 70 days. The property must be fully furnished and you must charge the going, market rate (you cannot let your friends or family have it at a reduced rate). You cannot let the same person (or group) stay in your property for more than 31 days in any seven-month period although you can offer an out-of-season long let for the remaining five months. If you fulfil all of these conditions the income from your holiday let is still subject to income tax but you can claim all expenses against tax. Expenses include things such as insurance and mortgage interest payments, legal and letting agent's fees, maintenance costs and heating and lighting bills. You can also offset any losses on the property against any other income to help reduce your tax bill.

 

If you are married you can get additional tax benefits by buying the property in the name of the lower of the two earners. This is particularly beneficial if the person with the lower income is also in a lower tax rate band.

When you decide to sell your holiday property you will have to pay capital gains tax but at a much lower BATR (business asset taper-relief) rate and, unlike non-business assets, you can sell after only two years. If you want to invest the profit of a sale in another holiday property, the tax due is deferred but only if you invest again within three years.

Finding a Property
Short or Long Lets
Holiday Lets
Corporate Lets
Landlord Responsibilities
Student Lets
Holiday Lets Tax

 

UK Investments - Financial, Property & Other Investments - 1998-2008

Investments Newsletter

Investments Newsletter