SHOULD LANDLORDS CONSIDER HOLIDAY LETS AS AN ALTERNATIVE TO BUY TO LET?
Wed 16 Oct 2019
Increasing numbers of landlords are looking to purchase holiday lets rather than buy to lets not only because of potentially higher returns but tax savings. The growing popularity of ‘staycation’ holidays in the UK is clearly a factor too.
Holiday let owners can offset 100% of mortgage interest and any losses against future gains whereas tax relief for buy-to-let landlords is reducing to a 20% credit by 2021, regardless of their tax band.
Nor do holiday let homes have to be in coastal or country areas but must be furnished, available for at least 210 days a year and tenanted for a minimum of 105 – and not more than 155 days. Therefore, landlords must be confident of finding tenants for no longer than 6 months at a time as void periods will of course reduce profits.
Like buy-to-let, holiday lets are subject to the 3% stamp duty surcharge if the landlord owns another property and mortgage options may be more limited.
Those tax changes, loss of the full wear and tear allowance, the letting fee ban as well as the likely scrapping of section 21 ‘no fault’ evictions are persuading many buy-to-let landlords to consider their options.
Capital allowances are not generally available on buy to lets but holiday let owners can claim significant relief on heating, air conditioning and furniture - including kitchen and bathroom equipment.
There are further tax advantages when selling, as holiday lets should qualify for entrepreneur’s relief based on CGT at 10% not the 28% payable by buy to let landlords.
Holiday lets are certainly worth considering - and Jeremy Leaf & Co is a great place for most of the answers!
Jeremy Leaf, a former RICS residential chairman & independent North London Estate Agency owner.
Autumn 2019
Holiday let owners can offset 100% of mortgage interest and any losses against future gains whereas tax relief for buy-to-let landlords is reducing to a 20% credit by 2021, regardless of their tax band.
Nor do holiday let homes have to be in coastal or country areas but must be furnished, available for at least 210 days a year and tenanted for a minimum of 105 – and not more than 155 days. Therefore, landlords must be confident of finding tenants for no longer than 6 months at a time as void periods will of course reduce profits.
Like buy-to-let, holiday lets are subject to the 3% stamp duty surcharge if the landlord owns another property and mortgage options may be more limited.
Those tax changes, loss of the full wear and tear allowance, the letting fee ban as well as the likely scrapping of section 21 ‘no fault’ evictions are persuading many buy-to-let landlords to consider their options.
Capital allowances are not generally available on buy to lets but holiday let owners can claim significant relief on heating, air conditioning and furniture - including kitchen and bathroom equipment.
There are further tax advantages when selling, as holiday lets should qualify for entrepreneur’s relief based on CGT at 10% not the 28% payable by buy to let landlords.
Holiday lets are certainly worth considering - and Jeremy Leaf & Co is a great place for most of the answers!
Jeremy Leaf, a former RICS residential chairman & independent North London Estate Agency owner.
Autumn 2019