More and more people are becoming landlords, with latest figures suggesting there are now more than 2.5m landlords in the UK.
Many of these are residential properties let for the long term, but an increasing number are being used for short-term furnished holiday lets. 
In an area like the South West, historically particularly popular for holidaymakers and even more since the pandemic, this can be a really viable option.
And as winter passes by and the beginnings of spring appear to be in the air, now might be a good time to plan a new investment.
There are a number of advantages of short-term lets, including higher returns than residential lettings in popular tourist locations and less issues around moving on tenants if you decide to sell.
Special tax advantages are also available for furnished holiday lets providing you meet the relevant criteria.
Benefits
If your property meets the criteria below it will not be subject to the restriction of mortgage interest relief that applies to residential property, limiting it to 20%.
You can claim capital allowances for items such as furniture, equipment and fixtures. Profits from furnished holiday lets will also count as earnings for pension purposes, meaning you are allowed to contribute more.
When you come to sell the property, you have the benefit of capital gains tax reliefs which are available for traders such as Business Asset Disposal Relief and Rollover Relief, although these may be restricted for any periods before the property became a furnished holiday let.
Criteria
To qualify as a furnished holiday let, and benefit from the above tax rules, the property must be:
- In the UK or the European Economic Area – this includes Iceland, Liechtenstein and Norway
- Sufficiently furnished to be used as a holiday home
- Available to let for at least 210 days a year
- Actually let for 105 days with no let for more than 31 days.
Don’t panic if there is the odd year when your property does not meet the final criteria as there are elections that can be made.
There are obviously a number of other considerations when deciding to let a property as a furnished holiday let, it’s definitely a more ‘hands-on’ investment due to the high turnover of guests and there are also special rules in parts of the country that may limit the number of days a property can be let in this way.
Help is at hand
As with all financial matters, it certainly pays to speak to an expert before making any decision or taking action. If you would like to have a conversation to understand the complexities of the above, please get in touch with your usual Haines Watts contact.
