A staycation boom is predicted for the UK this year, with the rules on foreign travel still uncertain, and a population eager for a break after a very long winter. The growing demand for holiday lets has led to an increase in people seeking tax advice on buying a second property, according to the Property Reporter website.
Wealth management firm Handelsbanken draws attention to the rules that will allow potential buyers to qualify for tax breaks relevant to furnished holiday lets (FHL), as opposed to traditional residential lettings.
Certain rules apply to qualify as a FHL. The property has to be in the UK or the European Economic Area, and available for at least 210 days a year to let, and let as an FHL for at least 105 days a year. It must not be let to the same person for more than 31 days, and letting to family and friends at reduced rates does not count.
Mark Collins, Head of Tax at Handelsbanken Wealth Management, explained that the trend for staycations and the current low Stamp Duty Land Tax rates has generated more requests for tax advice from customers thinking about buying a second property in the UK.
Collins comments: “While our customers might be considering a second property for use as a holiday home or to let to the general public, we’ve found that more often than not their motivation is a combination of the two.”
“From a tax perspective furnished holiday lets present an unusual hybrid: not quite a business in the conventional sense, but benefiting from a number of useful tax breaks associated with business enterprises unavailable to regular buy-to-let landlords.”
The tax for a FHL differs from a traditional residential buy-to-let in that owners can deduct the full amount of their finance costs, such as mortgage interests, from their turnover to calculate rental profits, among other advantages.
If you are looking for property management in Hornchurch, please contact us today.