What is a furnished holiday let ?
Welcome to the ultimate guide on furnished holiday lets! If you've ever considered venturing into the world of vacation rentals, you might have come across the term "furnished holiday let." But what exactly is it?
A furnished holiday let (FHL) refers to a property that is available for short-term rentals and is furnished to a high standard. Unlike traditional buy-to-let properties, FHLs come with certain tax advantages and eligibility for specific reliefs.
In this article, we'll explore the ins and outs of furnished holiday lets, including the benefits, requirements, and key considerations for both owners and potential guests.
What is a furnished holiday let ?
Furnished holiday lets (FHLs) are a unique type of vacation rental property that offer a range of benefits to both owners and guests. Unlike traditional long-term rental properties, FHLs are designed specifically for short-term holiday bookings, providing a more tailored experience for guests.
At its core, a furnished holiday let is a property that is fully equipped and furnished to a high standard, ready for guests to move in and enjoy their vacation.
These properties are often located in popular tourist destinations, offering easy access to local attractions, amenities, and the great outdoors. From cozy cottages to spacious apartments, FHLs come in a variety of shapes and sizes to cater to different traveler preferences and group sizes.
Difference between a holiday let and a buy to let
The key distinction that sets FHLs apart from regular rental properties is their specific tax treatment and eligibility for certain reliefs and allowances.
Owners of FHLs can potentially benefit from more favourable tax considerations, as well as the ability to claim deductions for various expenses associated with running and maintaining the property.
This makes FHLs an attractive investment opportunity for property owners looking to maximise their rental income and take advantage of the booming vacation rental market.
What does a furnished holiday let mean ?
The term "furnished holiday let" refers to a property that is available for short-term rental, typically for periods of less than 31 consecutive days.
These properties are fully furnished, equipped, and ready for guests to move in and enjoy their vacation without the hassle of bringing their own furniture, appliances, or linens.
Why people use furnished holiday lets ?
Furnished holiday lets are designed to provide a comfortable and convenient home-away-from-home experience for guests.
They often include a range of amenities and features that cater to the needs of holidaymakers, such as a well-equipped kitchen, comfortable living spaces, and outdoor areas for relaxation or entertaining.
What makes a furnished holiday let furnished ?
The "furnished" aspect of an FHL means that the property is equipped with all the necessary furniture, appliances, and household items required for a comfortable stay.
This includes items like:
beds,
sofas,
dining tables,
cookware
linens.
TV
The level of furnishings and the overall quality of the property are crucial in determining whether a rental can be classified as a furnished holiday let, as these factors contribute to the overall guest experience and the property's eligibility for specific tax benefits.
How to qualify as a Furnished Holiday Let
HMRC states that to qualify as a furnished holiday let, your property must be:
Situated in the UK or European Economic Area
Furnished
Commercially let out (you must intend to make a profit)
Occupancy conditions
There are three occupancy conditions that a furnished holiday let must meet to qualify for tax advantages.
The property must be available to commercially let out to the public for at least 210 days (30 weeks) per year.
If let to the same person for more than 31 days, there should be no more than 155 days (22 weeks) of ‘long occupation’ in that year.
The property must be rented out to the public for at least 105 days (15 weeks) for the 210 days available. This does not include private or discounted use by yourself, family or friends.
What happens if my property doesn’t reach the threshold?
If you don’t reach the 105 day occupancy condition, there are two options available (known as elections) that can help:
Averaging election: If you’ve more than one FHL property, you can average the rate of occupancy across all properties.
Period of grace election: If your property reaches the occupancy threshold in some years but not in others, you can apply for a period of grace (for a maximum of 2 consecutive years).
Are holiday lets regulated ?
Yes, holiday lets are regulated in many countries and regions.
The rules and regulations governing holiday lets can vary significantly depending on the location, but there are some common areas of regulation that holiday let owners and operators need to be aware of.
Planning laws
One of the key areas of regulation for holiday lets is local zoning and planning laws. In many areas, there are specific zoning designations or permits required to operate a short-term rental property in the future as of 2024 this is not the case.
Holiday let taxes
Another important area of regulation for holiday lets is taxation.
Holiday let owners may be subject to a variety of taxes, including income tax, capital gains tax, and in some cases, a special tourism or occupancy tax.
The specific tax obligations will depend on the local laws and the way the holiday let is structured (e.g., whether it is a primary residence, an investment property, or part of a larger holiday let business).
Holiday let owners need to ensure that they are properly registering their rental income and paying all required taxes, your accountant should advise you on the best route for this
Health & Safety
Safety and building standards are also an important consideration for holiday lets. Holiday let properties need to meet certain minimum standards for things like fire safety, electrical wiring, and structural integrity.
There may also be specific requirements around the provision of amenities, the condition of the property, and the maintenance of common areas.
Failure to comply with these safety and building standards can result in fines, penalties, or even the revocation of a holiday let license or permit.
Furnished holiday let allowable expenses
As a specialised type of rental property, furnished holiday lets offer owners the opportunity to claim a range of allowable expenses that can help to reduce their tax liability.
These expenses are recognised by tax authorities as legitimate business-related costs associated with operating and maintaining a holiday rental property.
Advantages
One of the key advantages of owning a furnished holiday let is the ability to claim a broader range of expenses compared to traditional buy-to-let properties. FHL owners can deduct a variety of costs, including those related to the property's upkeep, marketing, and guest services.
Some of the common allowable expenses for furnished holiday lets include:
Mortgage interest or loan interest: FHL owners can claim the full amount of mortgage or loan interest paid on the property, unlike the limited interest deduction available for traditional rental properties.
Utility bills: Expenses such as electricity, gas, water, and internet costs can be claimed as allowable business expenses.
Cleaning and laundry costs: The costs associated with cleaning the property and providing fresh linens and towels for guests can be deducted.
Repairs and maintenance: Expenses related to the repair and maintenance of the property, including the replacement of furniture and equipment, can be claimed.
Insurance premiums: The cost of property insurance, public liability insurance, and other relevant insurance policies can be deducted.
Marketing and advertising: Expenses incurred in promoting the holiday let, such as website hosting, online listings, and brochures, can be claimed as allowable business costs.
Professional fees: Costs related to legal, accounting, or property management services can be deducted as business expenses.
Council tax and business rates: Depending on the location and classification of the property, the owner may be able to claim deductions for council tax or business rates.
Depreciation: FHL owners can claim capital allowances for the depreciation of certain assets, such as furniture, equipment, and fixtures.
By carefully documenting and claiming these allowable expenses, FHL owners can potentially reduce their overall tax liability and maximise the profitability of their holiday rental business.
Holiday Let income Calculator
Take advantage of our free holiday let income calculator created by Stayful, an holiday let management company with over 5 years experience in the holiday let sector managing properties all over the UK.
Holiday Let Management
If you are interested in hassle free holiday let management for your holiday let property, get in touch and we can provide expertise on income, occupancy & make your investment hands off.