Holiday Lets
Croeso! Whether you're an airbnb side hustle or you have multiple properties, we can help.
From an AirBnB in Holywell to a cottage in the heart of Snowdonia, Holiday Lets are big business in north Wales. HMRC treat them differently to a regular rental property. They’re a trading business, which brings certain tax advantages, but also increases the amount of work required to stay compliant.
Here’s a few of the things you’ll need to consider.
Welcome to north Wales!
Croeso i ogledd Cymru!
Furnished Holiday Lets (FHL) are treated as a trading business rather than an investment business.
To qualify, your property will need to be furnished, let on a commercial basis, and available for letting for 210 days in a year and actually booked for 105 days.
The Qualifying criteria for business rates are even more stringent. See our guide here.
Tax and dealing with HMRC
Treth a delio HMRC
FHL income is reported under Self Assessment (SA) using form SA105. If you’re not already registered for SA you’ll need to do so and you’ll receive a Unique Taxpayer Reference (UTR) code. Joint owners will need to register separately and file their own returns.
The tax year runs from 6th April to the following April. Tax returns are due by 31st January following the end of the tax year. Payments are due on 31st January and 31st July.
You can choose your accounting period, but it’s generally easier to keep it the same as the tax year.
If your turnover is likely to over £85,000 then VAT will apply. Some items purchased prior to VAT registration can be claimed back.
Expenses and Allowances
Treuliau a Lwfansau
Mortgage costs are fully allowable for a qualifying FHL – the section 24 rules don’t apply!
Expenses can be claimed as with any trading business. We can advise exactly what is allowable.
Best of all, Capital Allowances are available for FHLs. Most times of a capital nature (such as furniture and fixtures) can be claimed as Capital Allowances. This gives 100% relief from tax in the year of purchase.
Book Keeping
Cadw Llyfrau
You’ll need to keep proper records of all your financial transactions, plus evidence of bookings and availability.
We’d always recommend software rather than spreadsheets. Quickbooks and Xero are well regarded. If you’re VAT registered then Making Tax Digital (MTD) makes software mandatory.
Most FHLs manage their own book-keeping. Your accountant generally has access so a periodic ‘tidy up’ can be done. We can set up the software for you and provide initial training.
Tax Planning
Cynllunio Treth
The special trading status of FHLs opens up a number of advantageous tax planning opportunities.
Entrepreneurs relief is available upon disposal which typically will allow for a much lower rate of Capital Gains Tax. Gift and Rollover relief are also available.
Profits from FHLs are relevant earnings for pension purposes (unlike B2L income) which offers many planning opportunities for higher rate taxpayers.
The favourable tax treatment of FHLs may not last forever. But whilst it does, make sure your accountant knows how to make the most of what’s on offer.
We offer a no obligation consultation to discuss your needs.
hello@propertytax.wales