Tax Benefits Of Holiday Lets | SAVE Tax | Accountant & Mortgage Advice

Hello and welcome back to our channel and podcast! My name’s Gemma, and here at WIS we talk about all things relating to money, mortgages, and a positive money mindset.

On today’s episode of Let’s Talk Money and Mortgages, we’re joined by Ifthikar (“Ifthi”), a trained accountant and mortgage advisor with over 10 years of experience, and one of the founding directors here at WIS.

A Quick Note on Movember

Gemma: I noticed you look a little different today — growing a moustache?

Ifthi:

Yes! We’re supporting Movember as a company, raising awareness for men’s health issues like prostate cancer.

• Staff are growing moustaches this month.
• We’re matching any donations people contribute.
• Every little helps, even £5.

This is valid for November 2021, and we’ll leave a donation link below.

What is a Furnished Holiday Let?

Ifthi:

It’s essentially a property you buy to use as a holiday home and then rent out for the rest of the year.

Usually in popular destinations: beaches, historic sites, countryside walks.

Guests stay for shorter periods (weekends, holidays, weeks in summer).

It’s different from a buy-to-let because it’s classed as short-term serviced accommodation.

How does a Furnished Holiday Let differ from a Buy-to-Let?

Ifthi:

• Buy-to-let: Rented out under an AST (Assured Shorthold Tenancy), usually for 6 or 12 months.
• Furnished holiday let: Short stays — weekends or weeks at a time.

HMRC criteria for a Furnished Holiday Let:

• Property must be available for 210 days per year.
• It must be actually let for at least 105 days per year.
• It cannot be let to the same person for more than 31 consecutive days.

If you don’t meet these conditions, the property will be treated as a buy-to-let for tax purposes.

What happens if you don’t meet the criteria?

Ifthi:

It will be treated as a normal buy-to-let, and the tax treatment will change accordingly.

Why do people choose holiday let mortgages instead of buy-to-let?

Ifthi:

• Staycations: Since COVID, many people preferred UK holidays, so demand increased.
• Dual use: Owners can enjoy the property for their own holidays.
• Tax benefits:
• Section 24 interest restrictions don’t apply, so you can deduct mortgage interest in full.
• Possible Capital Gains Tax advantages.
• Potential for Rollover Relief.

What are the tax-deductible expenses?

Ifthi:

We’ve done another video with a full list (link below), but here are the key extras for holiday lets:

• Full mortgage interest deduction (unlike buy-to-let).
• Agent fees (managing bookings, cleaning, etc.).
• Replacements (plates, furniture, small items) are deductible.

In buy-to-lets, replacements usually have to be “like-for-like”, but holiday lets allow more flexibility.

How much deposit do you need for a holiday let mortgage?

Ifthi:

• Typically 20–25%, similar to buy-to-let.
• Some lenders may require a larger deposit depending on the property.

The stress test differs:

• Buy-to-let: Based on rent.
• Holiday let: Based on seasonal averages (high, mid, low seasons).

Each lender calculates this differently, so advice is crucial.

How does Capital Gains Tax (CGT) work for Furnished Holiday Lets?

Ifthi:

For Buy-to-Let:

• CGT = Sale proceeds – (Purchase price + allowable costs).
• Allowable costs: Stamp duty, solicitor fees, estate agent fees, renovations.
• Annual allowance: £12,500 per person (doubles for joint ownership).
• Tax rate: 28% for higher-rate taxpayers, 18% for basic-rate taxpayers.

For Furnished Holiday Lets:

• Considered a trading property, not just an investment.
• May qualify for Entrepreneurs’ Relief (now Business Asset Disposal Relief).
• Taxed at 10% instead of 18–28%.
• Conditions apply: Must be run as a genuine business (e.g., marketed on Airbnb, own website, run commercially).
• Often sold through specialist agents/websites, not just Rightmove.

What is Rollover Relief?

Ifthi:

• If you sell your holiday let as a business and reinvest in another business asset, you may defer paying CGT.
• Example: Sell a property in Scotland and buy another holiday let in Cornwall.
• Doesn’t always have to be another property — could also be another type of business asset (like shares in a company).
• It’s very technical, so seek advice before proceeding.

Final Thoughts

Gemma: Thanks, Ifthi. I think our viewers will find this really useful — especially since you bring both the accountant and mortgage advisor perspectives together.

Ifthi: Remember:

• These benefits depend on meeting the right conditions.
• Always speak to an advisor before making decisions.

Gemma: We’ll leave our WIS contact details below if you’d like advice, and the Movember donation link too.

Reminder: A mortgage is secured against your home or property. It may be repossessed if you do not keep up with repayments.