Henderson

Accountants and Tax Advisors

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Tel 0141 887 9400
Accountants and Tax Advisors in Glasgow and Paisley

Holiday Lettings

What accommodation can qualify as furnished holiday lettings?

To qualify as a furnished holiday letting the accommodation must meet all four of the following conditions :-

  • Must be furnished.
  • Must be available for letting to the public for at least 210 days for 2012/13 onwards, previously 140 days.
  • Must actually be let for at least  105 days for 2012/13 onwards, previously 70 days
  • Must not be let for periods of longer-term occupation for more than 155 days during the year.

Furnished Holiday Lettings

Profits from furnished holiday lettings are taxed as a trade for tax purposes and therefore have some tax advantages over other types of lettings.  Such as:-

  • Entitlement to capital allowances on furniture, furnishings, and white goods used in the letting property, as well as on plant and machinery used outside the property (such as vans and tools)
  • Capital Gains Tax  relief is available when the property is sold such as, business asset rollover relief, entrepreneurs’ relief, gift relief and relief for loans to traders.
  •  Profits count as earnings for pension purposes.

NB Sideways relief for losses against general income was abolished for 2011/12 onwards.

Renting a Room Relief

Profits from renting a room in your home to lodgers are normally exempt from tax if they are below £4,250.

Sale of a Letting Property

Profits from the sale of a letting  property are subject to capital gains tax.  The first £10,900 is exempt.  Basic rate taxpayers pay tax at 18% and higher rate taxpayers pay tax at 28%.

What is Capital Gains Tax.

Property Income

Income from UK and overseas properties are tax on an accruals basis not a receipts basis.  Tax relief is available on the Interest element of the monthly mortgage payments, as well as factoring fees/letting agent’s commission/council tax/building and contents insurance and repairs, although some types of repairs will be treated as enhancement expenditure and won’t qualify as a repairs, instead relief will be given when the property is sold.

Tax relief is generally not available on the following:-

  • Furniture, fittings, white goods, crockery and linen where the wear and tear allowance is claimed.  Replacement cost may be used in stead of the wear and tear allowance.  Where the replacement method is used not relief is claimed for the initial cost of the item.
  • Any large repair costing more than 50% of the value of the item is capital expenditure, not revenue, such as a large repair to the roof of the letting property.
  • Reburbishment or upgrading of  the property is capital expenditure.  Relief is given when the property is sold.