Benefits of a Furnished Holiday Let
If you’re lucky enough to own a Furnished Holiday Let (FHL), you’re probably very popular with friends and relatives looking for a hassle-free vacation. You may also find that a Furnished Holiday Let is much more efficient from a tax perspective than buy-to-let properties. So, let’s take a closer look at the tax advantages of furnished holiday lets .
The Advantages of Running a Furnished Holiday Let
Landlord tax is always a burden and could leave you paying significant bills. But holiday lets undoubtedly benefit from favourable tax treatment. Benefits include:
Tax Deductible Expenses
Capital allowances can be claimed on your Furnished Holiday Let. This is a type of tax relief for businesses which allow you to deduct some or all of the value of an item from your profits before you pay tax. In the case of a Furnished Holiday Let, capital allowances can be claimed on part of the purchase price paid for the property or the development costs to build or refurbish it. Capital allowances can be claimed on the furniture, furnishings and equipment you purchase for your property. These allowances are not available for buy-to-let properties.
To avoid excessive property tax for landlords and to ensure profit remains as high as possible, many property owners choose to go down the FHL route. Speak to a buy-to-let accountant if you feel you want to reduce taxes and explore FHL. Experts will discuss all things property tax with you and offer sound advice.
Make Tax-Advantaged Pension Contributions
Income generated from a FHL property is classed as ‘relevant earnings’ which means you can make tax-advantages pension contributions.
Tax Relief When You Sell Your Property
Capital Gains Tax (CGT) is the tax you pay on profits made from a property sale. CGT relief is available to those who sell an FHL property and not to those who simply rent a property on a long-term basis. Relief includes, Entrepreneurs Relief, Roll-Over Relief, Hold-Over Relief.
Split the Profits with Joint Owners
When it comes to shared ownership of an FHL, profits can be flexibly distributed between the legal owners for tax purposes. With long-term rentals, profits are distributed according to the ownership split – for example, 50/50.
Mortgage Interest Relief
With an FHL, mortgage interest is fully deductible. This is different from other types of residential property lettings which have relief restrictions.
For all issues regarding HMRC, rental income, landlord tax returns and more, contact IBISS & Co, a professional team of chartered tax advisors and accountants working across Barking, Tooting and Walsall.