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Hints & Tips

Lymm Village

Tax Hints and Tips

Lymm Village

Free hints and tips about tax and accountancy from Lymm Tax

Holiday homes

Did you enjoy your holiday so much that you are thinking of acquiring a property in your chosen holiday destination? You may be interested to know that a holiday home can be a tax efficient investment.

If you want to buy a holiday home and are willing to let it to other people for at least 210 days per year and actually succeed in letting it on a short term holiday basis for 105 days certain tax advantages will be available to you. The 105 day requirement leaves you plenty of time to use the property yourself: even if the season only runs from May-September this would still leave you at least a month for yourself.

The property can be in the UK or the EEA.

“Buy to let” properties let on a long term basis do not have any tax advantages but the operating of furnished holiday accommodation is treated as a trade because it requires more involvement by the owner (even if they have to hire someone else to clean the house and greet guests rather than do this themselves).

The tax advantages include:

  • If you have made a capital gain on something else e.g. selling a buy to let property you can delay paying the Capital Gains Tax (CGT) if you invest in a holiday property.
  • If you make a profit when you sell a property which has been used as a holiday let you should be able to pay CGT at only 10% rather than the normal rate of 28%.
  • From an Inheritance Tax (IHT) viewpoint, if you die with qualifying holiday properties in your estate these can qualify for Business Property Relief which means you don’t have to pay IHT on them.
  • You can reduce your tax on the income by offsetting payments into a pension plan.