A furnished holiday letting won’t just give your customers much needed relief
Landlords should be aware of the different rules which apply to furnished holiday lets and private rented properties, as the tax implications can be enormous.
Privately rented properties that are not a principal private residence, and therefore do not qualify for principal private residence relief, are normally subject to capital gains tax at 18 per cent or 28 per cent on disposals – a cost of potentially tens of thousands of pounds.
However, where properties are furnished holiday lets, they may be eligible for entrepreneurs’ relief and are therefore subject to capital gains tax at 10 per cent on disposal.
There is also a further tax advantage to furnished holiday lets that will make a more immediate difference. New restrictions on mortgage interest relief, which came into effect on 6 April 2017 and which threaten to move landlords into higher income tax bands, do not apply to furnished holiday lets.
For a property to be considered as a furnished holiday let, it must meet three conditions, set by HM Revenue & Customs:
Where you have more than one furnished holiday letting and one fails to meet the 105 day letting condition, you may instead apply an average across all the furnished holiday lets you own.
For more information, contact Baines Jewitt on 01642 632032