Will I Benefit from the 2010 Budget Changes to Holiday Homes?
The old Labour government had planned to scrap a number of tax benefits for holiday homeowners, but luckily in its June Budget the coalition government decided to reinstate them, for now at least.
Before you crack open the bubbly though it is worth noting that not all holiday homes are eligible for the tax breaks.
These few questions should tell you if you are.
1) Where Is Your Holiday Home?
- A) In the UK
- B) In the European Economic Area
- C) Outside the UK and the European Economic Area
2) How Many Days A Year Is Your Holiday Home Let For?
- A) Over 140 days
- B) Around 140 days
- C) Less than 140 days
3) Do You Make A Profit From The Property?
- A) Yes, we charge a fee
- B) Yes, a small profit
- C) No, we normally rent to friends and family
4) How Many Days Is It Normally Let For Per Year?
- A) More than 70
- B) Around 70
- C) Less than 70
5) Do You Vary Who You Let To?
- A) Yes, we never have anyone stay for longer than 30 days
- B) We have a few regulars
- C) No, we just rent to one person/family
Mostly A – The Changes Will Benefit YouYour holiday home sounds like it is just that, a holiday home, which means the government will treat it as a business and not see you as a landlord in terms of tax benefits. To be eligible for the benefits you must let your home for more than 70 days a year and have it available for 160, which you do.
You must also show that you make a profit no matter how small this may be. The tax breaks for holiday homes have been extended which means you will be able to offset any trading losses against your income, for example a loss of rental income. In some instances you will also be allowed to postpone any Capital Gains Tax if you are buying another property.
Your income from your furnished holiday let is also treated as part of net relevant earnings when calculating tax relief on your pension.
Mostly B – You Could Benefit From The ChangesIt sounds like you are on the verge of being classed as a holiday home. It might be worth making a few cosmetic changes and altering your working hours to help you benefit from the tax reliefs on offer.
If your home is available for less than 140 days a year you will need to extend this, and make sure it has an occupant for at least 70 days, with no person in for longer than 31 days. If it doesn’t mean too much upheaval you should seriously consider adapting the holiday letting as it could help boost your profits.
Mostly C- unfortunately You Will Not BenefitUnfortunately from your answers it seems like the benefits to be derived from owning a holiday let will mean little to you. For tax purposes you are more likely to be treated as a landlord and therefore not as a trade, which is what holiday letters are classed as.
If your property is outside of the UK and the European Economic Area it will immediately not classify for the changes. It sounds as though you use the holiday home more for fun than you do to make a profit, so unfortunately in the eyes of the current government you are not exempt from the taxes.
There can be a fine line between what is classed as a holiday home or a buy-to-let property. The government may be being favourable to holiday homeowners at the moment but there is a god chance they could do another u-turn on this decision, so it is best to make the most of it while you can.