Holiday Lets Explained | How To Save Tax !

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Today, we’re joined by Ifti, trained accountant and mortgage advisor with over 10 years’ experience, and a founding director at WIS.

Q1: What is a holiday let?

Gemma: First question: What is a holiday let?

Ifti:

A holiday let is a property purchased to rent out for short periods, often in popular destinations like beaches or historic sites.

It’s similar to Airbnb, where guests stay for a few days or a week.

Many of these properties are furnished, so it’s often called a furnished holiday let mortgage.

Q2: Why have holiday lets become popular?

Ifti:

Popularity has increased since COVID-19 due to staycations.

Many people prefer taking holidays within the UK, often near beaches or scenic areas.

This has led to higher inquiries for holiday lets in recent years.

Q3: Are there tax benefits to holiday lets?

Ifti:

Holiday lets can provide tax advantages if certain conditions are met:

• Interest on the mortgage is fully deductible, unlike standard buy-to-let where high-rate taxpayers can only claim partial relief.
• Other benefits include capital gains rollover relief.

Check our previous video for a detailed discussion of holiday let tax benefits.

Q4: Are holiday let mortgages available from all lenders?

Ifti:

No, this is a specialist market.

Most high street lenders focus on residential or standard buy-to-let mortgages.

Holiday let mortgages are usually offered by regional building societies and specialist lenders.

Q5: Are there properties that lenders avoid for holiday lets?

Ifti:

Lenders generally prefer houses and some flats.

Caution with:

• Park homes in holiday parks
• Leasehold properties (may require a higher deposit, e.g., 40% instead of 25%)

Always check before making an offer to avoid issues with mortgage approval.

Q6: What interest rates apply for holiday lets?

Ifti:

Interest rates are generally higher than standard buy-to-let rates, about 1% higher.

Reason: Higher risk for lenders due to:

• Periods with no occupiers
• Short-term tenancy turnover
• Potential property damage

Q7: Are there minimum income requirements?

Ifti:

Minimum income requirements vary by lender.

Standard buy-to-let: around £25,000–£30,000.

Holiday lets may require higher income due to potential down times (e.g., bad weather affecting bookings).

Banks want to ensure you can cover mortgage payments even during periods of low rental income.

Q8: Are there other points to consider for holiday lets?

Ifti:

Holiday lets are more hands-on than traditional buy-to-let properties.

Tenants stay short-term, meaning frequent management and maintenance.

Consider working with a local agent if you do not live near the property.

Many owners also use the property themselves during downtime, providing personal enjoyment.

Q9: Are there restrictions on staying in your holiday let?

Ifti:

Check with your lender for specific conditions.

HMRC rules for a property to qualify as a furnished holiday let:

• Available to the public for 210 days per year
• Occupied for at least 105 days
• Maximum stay per individual occupier: 31 days

Lenders will require that the property generates income according to these rules.

Disclaimer

These points may not apply to everyone—consult a qualified advisor.

WIS can assist with mortgages, accountancy, wealth management, and insurance.

Mortgages are secured against your home and may be repossessed if repayments are not maintained.

Gemma: Thanks again, Ifti. We’ll be back next week with another episode of Let’s Talk Money and Mortgages. Stay safe and see you soon!