Holiday let Mortgages

Holiday rentals are short term lets, often for just a few days

They require a lot more input from the managing agent as there will be many changes of tenancy

You will need to arrange a mortgage that is suitable for holiday rentals

Furnished Holiday Lets

Most buy to let lenders will not allow you to let on a short term holiday rental

You will need a type of mortgage that is intended for this type of short term lending

The landlord can stay in the property for a few weeks a year but the understanding is that the property will be commercially let for most of the year

There is a lot more work involved – lots of changes of Tenancies, cleaning, organisation, but the rent payable is much higher

The minimum deposit will be 20%, but better (lower) rates are available with a 25% deposit

Please contact us for an indication of the rates available

In a similar fashion to ‘buy to lets’ you stand to gain from the rental income and the potential of capital gains from the sale of the property at some point in the future

Advantages of Holiday lets

There are some unique advantages:

• You can stay in the property (for a holiday) for a few weeks in the year
• You will get full income tax relief from your mortgage interest payments (you only get 20% relief with Buy to lets)
• A holiday let is treated as a business for income tax purposes. The property may qualify for Business property relief for inheritance tax purposes
• When the property is sold you may qualify for Business Asset disposal relief – this will reduce the capital gains tax normally payable on sale of property

Taxation for Holiday lets

The Inland Revenue regard income from Holiday lets as Business income.

You add the net profits from the Holiday let to your other sources of income and it is taxed at your highest rate

If the business is jointly owned then the profits are divided accordingly

HMRC require that you run your holiday let as a Business. They require that you make the property available for at least 210 days each year and achieve lettings for 105 days (This should NOT include days when your family or friends are staying)

Income from furnished holiday lets is subject to Value Added Tax (VAT) at 20%, once your income exceeds £85,000 pa (2022)

The Inland Revenue offer some concessions to holiday let businesses…

• You will get full income tax relief from your mortgage interest payments (you only get 20% relief with Buy to lets)
• A holiday let is treated as a business for income tax purposes. The property may qualify for Business property relief for inheritance tax purposes
• When the property is sold you may qualify for Business Asset disposal relief – this will reduce the capital gains tax normally payable on sale of property
• Net profits from Holiday let property is likely to count as income for Pension contributions. This may enable you to put more money into your Pension and to benefit from tax relief

It is likely that you will pay Business rates (instead of Council tax). Business rates pay for local services, such as Police, Fire brigade, Leisure and Recreation, Waste management etc

Managing your property

We recommend that you employ a professional holiday letting agent to manage your property

A holiday letting agent can help in many ways…

• Provide a professional shop window for your property
• Provide the booking facility that you will need to manage your property
• An Agent will be available to answer questions from potential customers
• An Agent should (hopefully) be able to attract customers for you
• They will help you to manage your property efficiently

We can arrange your holiday let mortgage – please fill in Your Enquiry now!