New Tax Rules to Avoid Holiday Lets Abuse

Written on 14 January 2022 by Ray Boulger


New Tax Rules to Avoid Holiday Lets Abuse

Michael Gove has today announced new rules from April 2023 which are designed to prevent tax abuse by some owners of second homes in England (different rules apply in the other UK countries). At present second homeowners can avoid paying Council Tax on their property and access small business rate relief instead by simply declaring an intention to let the property on short term holiday lets for at least 140 days per year.

How Do You Qualify?

To qualify for business rates, instead of Council Tax, the new legislation will require second homeowners to prove their property is available for commercial short term self-catering rentals for at least 140 days in the coming year and was, in the previous year, available for letting for 140 days and actually rented out for 70 days. Evidence of lettings will be required, such as at least one website or brochure used to advertise the property and letting details and receipts.

97% of the 65,000 holiday let properties in England have rateable values of under £12,000, which means they qualify for small business rate relief and pay no rates at all.

Can You Rent to Family or Friends?

There is no restriction on letting to family or friends, providing the letting is on a commercial basis. This should not prevent the owner offering a reasonable discount to family or friends if, for example, they can avoid the normal commission otherwise payable to the site(s) advertising their property.

Why Has This Been Introduced?

These rule changes are aimed at people abusing the system but there has been a substantial increase in the number of genuine holiday let properties over the last few years, partly as a result of some owners who used to let their property on an Assured Short Tenancy switching to holiday lets because of the increased Income Tax charges on ordinary lets.

How Will This Impact Holiday Let Property Owners?

The only impact the new rules will have on genuine holiday let properties might be the need to provide the evidence outlined above, but this information should be readily available for the owner’s tax return.

Can You Get a Holiday Let Mortgage?

As a result of the increased demand more lenders now offer mortgages for holiday let properties. Interest rates for holiday let mortgages tend to be a little higher than for buy-to-let mortgages but the increased competition from lenders has reduced the difference.

Find out more about holiday let mortgages by calling us on 0330 433 2927 or send us an enquiry.

Categories: Buy-to-Let, Mortgages, Ray Boulger

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