The government’s much-vaunted ‘tax day’ produced few challenges to the status quo - but holiday lets are under scrutiny.
Currently the holiday let tax status is, as most people know, more favourable to investors than buy to let.
This is because HMRC classes a ‘furnished holiday let’ as a business, with consequently lower taxes. Owners must meet certain criteria, chiefly that the home is available to let for 201 days a year and is actually let for at least 105 days, with no single letting exceeding 31 days; and, of course, the property must be fully furnished.
These rules are highly specific but sticking to them is worthwhile in order to be classed as a business. This would mean paying business rates instead of the usually-higher council tax, while holiday home owners can offset many operating costs against tax, and when it comes to selling the Capital Gains Tax liability is lower than on a buy to let investment.
However, the government appears to have this lettings option as a target.
Yesterday’s announcement on long-term tax reform included the statement: “The government will legislate to change the criteria determining whether a holiday let is valued for business rates to account for actual days the property was rented, following a previous consultation. This will ensure that owners of properties cannot reduce their tax liability by declaring that a property is available for let while making little or no actual effort to do so.”
It continues: “Further details of the change and implementation will be included in the Ministry for Housing, Communities and Local Government’s response to the consultation on the business rates treatment of self-catering accommodation which will be published shortly.”
Otherwise, yesterday’s tax announcements had little new or challenging for agents - to the surprise of many.
You can see a full summary here.