After All The Tax Changes What’s Left For Holiday Property Owners?
Over the last few years we’ve seen many of the tax benefits of furnished holiday lets withdrawn by a combination of changes in legislation and reinterpretation of existing rules by The Revenue. The latest and potentially most valuable loss is an appeal won by HMRC ruling that holiday properties are not exempt from inheritance tax though this may well be appealed to a higher court.
So what benefits are still left for full time holiday properties that are bringing business and employment to their locations?
Small Business Rates Relief
Holiday lets should be assessed for business rates and not Council Tax. If it’s your only commercial property then you are entitled to small business rates relief which has been 100% for a few years and is guaranteed until at least March 2014. Most holiday lets should not be paying any Council Tax or Business Rates
If you are selling a property you have owned for a long time there may be a considerable capital gain, much of which may be taxed at 28% even for someone with a low income. Furnished Holiday Lets are entitled to Entrepreneurs’ Relief and so Owners should pay no more than 10% tax after allowances
If you are selling a holiday let and buying another one then you may elect to ‘roll over’ the gain into the next property and pay no capital gains tax at all. Careful consideration should be given to this as it may be better to use allowances and lower rate bands to settle the tax straight away.
Legitimate expenses are of course allowed against profits so make sure you keep receipts for everything you spend on the property. Think about the value of anything you do specifically for the business- you might be able to claim for travel or for items bought previously and now used in your holiday home. Remember a proportion of all expenses must be deducted to reflect personal use.
Overall although there’s been a reduction in tax benefits a holiday cottage in a good location has been an excellent investment in an uncertain period and is likely to continue to be a reliable asset that you can also enjoy.