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Easy Tax Guide for Furnished Holiday Lettings

Owning a furnished holiday let (FHL) can be a profitable venture for property owners, offering a unique type of short-term rental accommodation. Unlike regular property income, FHLs have specific tax treatments that need to be reported on your tax return.

In this blog post, we’re going to tackle some common questions about FHLs, from qualifying criteria to tax implications.

person filing taxes

Understanding Furnished Holiday Lets:

Your property must fulfill specific requirements to qualify as a furnished holiday let (FHL). It needs to be up for short-term commercial rentals aiming for profit, satisfy particular availability and promotion conditions, and come furnished for guest use. The property should also be located in the UK or the European Economic Area (EEA).

For tax purposes, if you own several FHLs in the UK, authorities consider them a single business, but you must keep individual records for each one. However, if you have properties in both the UK and EEA, they will be grouped into two separate categories.

Defining Commercial Letting:

Commercial letting refers to renting out your property with the intention of making a profit. Even if you offer lower rates during off-peak seasons, your property can still qualify as a commercial let. However, letting the property to friends or family at little to no cost does not count.

Furnishing Your Property:

Your FHL should be adequately furnished for daily living, and everything inside should be available for your guests to use.

Meeting the Conditions for FHLs:

Your FHL must be up for rent for holiday purposes for at least 210 days each year, and you should not rent it out to a single customer for more than 31 days in a row. Additionally, you need to ensure the property is actively rented out for at least 105 days per year.

Promoting Your Property:

Actively promoting your FHL is crucial, whether through rental listings, marketing efforts, or via holiday letting agencies or platforms like AirBnB.

Understanding Permissions and Taxes:

You may need permission from your mortgage provider or local council to operate an FHL. Income from your FHL must be reported to HMRC, and you’ll need to pay tax on it. However, as an FHL is treated as a commercial business, you can offset some costs to reduce your tax bill.

Considering Special Tax Rules and Benefits:

FHLs have unique tax rules and potential benefits, including capital allowances, pension contribution eligibility, and specific Capital Gains Tax relief options. You can also flexibly share the profits with your partner if you co-own the FHL.

By understanding these key aspects and actively managing your property, you can make the most out of your investment in a furnished holiday let.

In conclusion, Furnished Holiday Lets offer a profitable venture for property owners who follow the necessary criteria and understand the unique tax benefits. By actively promoting your rental and managing your property wisely, you can maximize your returns and enjoy the flexibility that comes with short-term rentals. Stay informed and proactive to make the most out of your investment and thrive in this attractive market.

Do you need more information? Feel free to contact us at Count for professional assistance! 

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