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18th April 2019

Holiday Letting Boom?

A holiday letting boom

Is expected to hit the southwest this year, according to local holiday letting agencies.

Apparently, there will be a noticeable increase in the number of people staying put and letting homes in coastal hotspots in the southwest. This is in part thanks to the Brexit delays and uncertainty this has caused.

This means more UK residents are opting for staycations for their annual holiday. If they do choose to stay home, they are also likely to holiday in their local area.

The weakness of the pound, the rising cost of flying internationally, the potential impact of Brexit on travel and the predicted heatwaves in the UK this summer are all positive factors. They encourage more people to have UK ‘staycations’.

Boost to the rapidly expanding holiday letting industry

This industry has been given a shot in the arm by the number of changes in buy-to-let regulations and tax liabilities in recent years. More landlords are opting for holiday letting over traditional long-term residential tenancies. This might mean a very different sort of mortgage is needed.

The reduction of mortgage interest relief, the extra 3% second home stamp duty surcharge and stricter affordability checks have been implemented. This means long-term residential letting investments are not always as profitable as they once were. As a result, many property investors are exploring the additional income and other opportunities that come with holiday letting.

Holiday home

Tax advantages of holiday letting

Furnished holiday lets (or FHLs) provide a number of advantages over traditional letting. In particular, HMRC views the revenue from these properties as earned income rather than non-earned income if their criteria are complied with. This means the property must be available for commercial holiday letting for at least 210 days a year and let for at least 105 days.

Those FHL properties that meet all the relevant HMRC criteria are exempt from the mortgage tax relief changes. Relevant earnings can be placed into a pension, allowing landlords to benefit from tax relief via this avenue.

In addition, landlords of FHL properties can claim capital allowances rather than the wear and tear allowance long-term letting landlords receive. Capital gains tax relief can also be on offer when a property is sold.

Growth of quality self-catering holiday letting across the UK

The phenomenal growth of self-catering holiday letting sites such as Airbnb, TripAdvisor, Holiday Letting, Owners Direct and HomeAway have also helped. They make the process of booking accommodation easier than ever for UK residents and international visitors alike.

This all means that mortgages to purchase holiday lets or Airbnb properties aren’t as simple as you might hope. If you are considering this type of investment or would simply like to discuss your options do give us a call. We are experts in this often complex field and would be delighted to talk things through.



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