The number of new Furnished Holiday Let owners in the UK is on the rise, as investors take advantage of the boom in staycations.
While many of us may be considering purchasing a holiday home, there are certain tax reliefs and rules that must be considered.
What is a Furnished Holiday Let?
These types of properties are considered separate from other residential and commercial properties by HM Revenue & Customs (HMRC) and are classified as trading businesses.
To qualify for the tax benefits that come with this, your holiday let must be actively promoted and let commercially, be furnished for normal occupation and be operated with the intent of making a profit.
It must also:
If you or your family use the property this doesn’t count towards this total.
How are Furnished Holiday Lets taxed?
They are taxed in the same way as any other trading business and offer several tax benefits as a result, including being taxed on profits rather than an individual income, when set up as a limited company.
This can allow owners to enjoy a lower rate of Corporation Tax and mean that income is treated as tax-free earnings for pension purposes.
Capital Gains Tax (CGT) reliefs can also be applied when a property is sold or transferred, including:
Owners of Furnished Holiday Lets can also benefit from some capital allowances, such as the Annual Investment Allowance, on certain assets used and fixtures inherent in the property, such as heating, lighting, ventilation, data and power installations.
This expenditure can be deducted from the profits of the business for Corporation Tax purposes.
Owners can also benefit from profit sharing and no National Insurance contributions on income from their Furnished Holiday Let.
Links: Furnished Holiday Lettings
