UK Holiday Homes
(Furnished Holiday Lets)
The investment demand for furnished holiday lets (FHLs), or more commonly known as holiday homes, is constantly on the rise.
The most appealing factor being that it is an asset-backed, well-known investment that offers tax relief - most commonly on pension contributions.
This type of investment is often mistaken for a traditional buy-to-let and may cause confusion as to why this type of property benefits from the higher returns and tax relief.
The main difference between them is the classification the two investments are given by the government; a buy-to-let property is classed as investment income whereas holiday homes (FHLs) are regarded as a trading activity.
Holiday homes reap the benefits of both commercial and residential properties. To class your property as a holiday home it will need to be furnished to the same level expected from a self-catered holiday cottage and will need to be let out with the intent of making a profit. From an occupancy point of view, the property will need to be available to guests for a minimum of 210 days every year and needs to be occupied by the public for at least 106 days per year.
The market for holiday homes keeps growing as the number of Brits who holiday in the UK keeps rising. Since 2017, the assessed spend on staycations in the UK was calculated to be around £23 million and increasing year-on-year. The spike in demand had a knock-on effect on pricing and therefore returns, with the average price of a week’s stay in peak season rising by 6.4% in the last year.
The main benefits of holiday home investments to investors are:
Growing market – demand is increasing for destination homes
Great alternative for a pension-scheme
FHL owners are subject to tax relief Tax deductible costs
No council tax or small business rate tax
Tax benefits on holiday homes
There are a number of tax benefits from investing in Furnished Holiday Lets (FHLs). The first being the ability to claim back capital allowances; similarly to a business, holiday homes allow owners to deduct a wide range of costs from their income prior to paying tax.
These costs can be anything needed to run the holiday home, for example white goods, furnishings and décor. These allowances will also roll-over meaning many FHL investors will pay zero tax for a number of years.
Unlike residential buy-to-let, holiday homes benefit from a relief in capital gains tax (CGT) at resale. Again, because holiday homes are classed as a trading activity owner of said property will benefit from entrepreneurs CGT relief. This means that instead of the usual 28% capital gains tax, holiday home owners will only pay 10%.
Finally, holiday homes give owners tax relief on pension contributions. The profits made from furnished holiday lets are classed as relevant earnings meaning the owners will be able to make larger contributions into their pensions. This is known as ‘tax advantaged pension savings’ something that isn’t possible with traditional residential rental properties.
Top 10 most popular locations in the UK over 2021:
Devon – 10%
Cornwall – 8.75%
Cumbria – 7.85%
North Yorkshire – 7.15%
Dyfed, South West Wales – 6.52%
Powys, Mid Wales – 5.56%
Norfolk – 5.2%
Gwynedd, North West Wales – 4.9%
Dorset – 4.1%
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Sykes figures show that new owner enquiries were up 80 per cent when UK travel resumed last summer, and a similar boom is occurring this time around.
Concerns around the spread of the virus meant even when people could travel abroad, 42.7% of people would rather a staycation vs. 24.7% who would rather go abroad (City Suites, 2020)
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Holiday Lets | Facts & Figures
Tax Efficent & Stable Returns with Buy-Backs
Number of jobs created by the UK travel industry
Tourism is the fastest growing industry in Britain. It is expected to expand by 3.8% a year up until 2025, accounting for 10% of all jobs.
Inbound tourism to the UK has been recorded at £50 billion
By 2025, the tourism industry in the United Kingdom is set to be worth over £257 billion
Increase in staycation bookings over 2021
4 in 5 Brits (84%) planned a 2021 staycation
Development of the Month: Cornwall
Prices from £295,000
A selection of 2 & 3 Bed Lodges & Barns
Earn 7% NET
Purchase immediately and earn a return straight away
Choose 3 or 5 year management terms and remain completely hands off
Personal use allowed for 2 weeks of the year
Additional Holiday Lets in the UK
NEW Devon Holiday Lets
One of the UK's top holiday destinations now offers an opportunity for those looking for hands-off income investments
Location: Devon, UK
Type: 2,3 & 4 bed Lodge options
Price Range: From £99,950
Completion: Completed & Operational
Predicted Yield: 6%
Tax efficient, No management fees or legal fees and offers capital growth
COMING SOON FOR 2022
A NEW selection of holiday lets coming soon for 2022. From lodges, barns and apartments, all available properties will be fully managed, tax efficient and yield you around 7% NET per annum.
Location: Devon, UK
Type: Lodges, Barns & Apartments
Price Range: From £200K
Completion: Immediately available to let
Predicted Yield: 7%
Fully furnished, fully managed holiday lets with personal usage each year