What are the Tax Incentives for UK Holiday Letting

Posted under General by Michael

The income accrued from letting a furnished holiday home is considered as the income from a business under the UK tax regulations. This income is treated differently from other incomes.

You can claim certain incentives, provided your property complies with the Inland Revenue rules. These rules are termed as Qualifying Tests.

As per the rules, your holiday home should be:
• Based in the UK
• Should be furnished for local accommodation
• Must be available for minimum 140 days for public holiday letting
• Should be actually let for minimum 70 days in a year on commercial rates (letting to relatives and friends on cheaper rates does not qualify for tax incentive)
• Customer’s stay for more than 31 days in the duration of 7 months not admissible
• Letting must be charged at full market value

Income from holiday letting is taxable, but certain types of expenses are allowed set off from this income. These include:

• Repairs and maintenance expenses
• Electric charges incurred on lighting, heating and air conditioning
• Decoration of the holiday home
• Management of property and cleaning costs
• Fees paid to letting agents and other legal expenses
• Insurance premium
• Interest paid on mortgage

You need not pay capital gain tax if you sell the property and the income is rolled over to another holiday letting property within 3 years.

It is advisable to consult a tax expert before deciding for holiday letting.