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Changes to tax advantages on furnished holiday lettings

tax, furnished holiday lettings,

As the owner of a furnished holiday home in the UK it is important that you know about the recent amendments to the tax allowances for the 2012-2013 tax year. The amount you can claim does vary from year to year depending on government policy.

Regulations can be hard to interpret so Weekly Home recommends working with your accountant to clarify your eligibility for certain tax benefits. 

If your property meets the following criteria you will be eligible to claim capital allowances, to be deducted from your gross rental income on: letting agent fees, insurances, interest on mortgage payments, maintenance and repair costs, utility bills, council tax and marketing costs.

To begin, there are strict criteria that must be met to qualify:

  • Your property must be fully furnished.

  • Your property must be made available for commercial letting to the public for at least 210 days over the tax year (previously 140 days).

  • Your property must be let as holiday accommodation to the public for at least 105 days over the tax year (previously 70 days).

  • Your property must be let at market rate and not at a lower rate to family or friends.

  • Your individual short term lettings must last no more than 31 days during the year to the same person.

The big change for 2012-2013 is that in previous tax years if you made a loss on your holiday letting, after claiming all the expenses, you could set that loss against your other income and claim some tax back. Now, you would benefit from carrying it forward to set against future profits. 

Gerry Jackson, of Oxfordshire accountants Critchleys, points out: “If you satisfy the criteria to qualify as a furnished holiday lettings business, the important point is that now, when you come to sell it, you may be eligible to pay Capital Gains Tax at the 10% rate for selling businesses, rather than the 18% or (more likely) 28% rate that normally applies to second properties.”

Check the HMRC tax advice on the DirectGov website to find out more.