Tax Advantages for Furnished Holiday Lets

What are the tax benefits of a furnished holiday let?

Letting your home to holidaymakers has many benefits including additional income and better security than if the property is left empty. But there are also tax advantages to be aware of if your property qualifies as a furnished holiday let (FHL).

Tax advantages for a FHL property

You are entitled to capital allowances for items you purchase to furnish your FHL, for example furniture, equipment and fixtures. Opting for high quality furnishings gives the potential for increased rental income. This is not applicable, however, to long term rental properties, only furnished holiday lets.

Profits from a FHL property count as earnings for pension purposes. This means you can make tax-advantaged pension contributions.

It is worth noting that unlike other long-term rental properties, if you share ownership of a FHL property with a spouse, you can split the profits however you choose. Therefore, even if you each own 50% of the property, the profits can be distributed unevenly to be most beneficial for tax purposes.

You are also entitled to claim certain Capital Gains Tax (CGT) reliefs for traders when you come to sell your FHL property. These include Business Asset Rollover Relief, Entrepreneurs’ Relief, relief for gifts of business assets and relief for loans to traders.

And finally, your FHL property is subject to Business Rate property tax. However, you can claim Small Business Rate Relief. This varies depending on the area the property is in, but can be up to 100%.

What are the requirements for my property to qualify as a furnished holiday let?

There are criteria to meet for your home to officially qualify as a furnished holiday let:

• The property must be in the UK or in the European Economic Area (EEA).
• Perhaps obvious, but the property must be furnished! There is no strict stipulation as to what must be included, but there must be adequate furniture and equipment. A good guideline is to include similar items that you would expect from a self-catering holiday home.
• You must intend to make a profit through commercially letting the property. The easiest ways to prove intent are by having a business plan or using a professional letting agent, such as ourselves!
• The property must be available to let. After a 12-month probationary period, the property must be: available for letting 210 days of the year; let commercially as a holiday property for 105 days; and, if occupied by one booking for more than 31 days, there cannot be more than a total of 155 days of longer lets within a year. Family and friends staying at the property for free or at a discounted rate do not count towards these requirements.

If you cannot meet occupation figures after the probationary period, you could be granted a period of grace. This applies for a maximum of 2 consecutive years, if the occupation requirements were met the previous year.

There you have it, if you have a property to let, letting it as a furnished holiday home can bring many benefits. Our friendly team is on hand to answer your holiday home property questions, we look forward to being of assistance.