Michael Gove has recently announced new rules from April 2023; which are designed to prevent second home tax abuse by some owners in England. Please note that different rules apply in the other UK countries. Currently second homeowners can avoid paying Council Tax on their property; and access small business rate relief instead by simply declaring an intention to let the property on short term holiday lets for at least 140 days per year.
Why has this been introduced?
These rule changes are aimed at people abusing the system; but there has been a substantial increase in the number of genuine holiday let properties over the last few years. As a result of some owners who used to let their property on an Assured Short Tenancy switching to holiday lets; because of the increased Income Tax charges on ordinary lets.
How will this impact holiday let property owners?
The only impact the new rules will have on genuine holiday let properties might be the need to provide the evidence outlined above; but this information should be readily available for the owner’s tax return.
How do you qualify?
To qualify for business rates, instead of Council Tax; the new legislation will require second homeowners to prove their property is available for commercial short term self-catering rentals for at least 140 days in the coming year and was, in the previous year, available for letting for 140 days and actually rented out for 70 days. Owners will need to provide evidence of this; such as at least one website or brochure used to advertise the property and letting details and receipts.
97% of the 65,000 holiday let properties in England have rateable values of under £12,000, which means they qualify for small business rate relief and pay no rates at all.
Can you still rent to family or friends?
There is no restriction on letting to family or friends; providing the letting is on a commercial basis. This should not prevent the owner offering a reasonable discount to family or friends if; for example, they can avoid the normal commission otherwise payable to the site(s) advertising their property.
Holiday let mortgage
As a result of the increased demand more lenders now offer mortgages for holiday let properties. Interest rates for holiday let mortgages tend to be a little higher than for buy-to-let mortgages; but the increased competition from lenders has reduced the difference.
Find out more about holiday let mortgages by calling us on 01634 968111 or send us an enquiry.
Important information
There is no guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount will depend upon your circumstances.
The fee is up to 1% but a typical fee is £598.
