Landlords Can Maximise Rental Income And Avoid Costly Legislative Changes With Short-Term Lettings

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With changing legislation, tightening tax rules, increased costs and seasoned landlords apparently exiting the market, it’s no wonder why more and more landlords are instead opting for short-term holiday lets. Even day-to-day homeowners (in other words, those who wouldn’t consider themselves landlords or property investors) are finding the option of hosting guests for a short-term in their properties to be very financially rewarding compared to the historically low-interest rates. There is also an increased popularity of staycations, a holiday spent in one’s home country rather than abroad, or one spent at home and involving day trips to local attractions.

Whilst it is financially rewarding to host guests, if you’re doing so in your own residential home, it won’t receive the official HMRC designation of Furnished Holiday Letting, Furnished Holiday Lettings attract tax benefits and are relatively easy to set up but the key is quality and marketing, as well as an understanding of the planning and tax implications you may face as a Holiday Accommodation provider.


You’ll find most Furnished Holiday Lettings will be in converted outbuildings or rural cottages, empty flats in tower blocks or other residential premises that can be let on a commercial basis. There is strong demand for one and two bedroom cottages and large houses which accommodate twenty or more guests, not to mention a strong demand for desirable locations.

You don’t necessarily need planning permission to use an existing residential property, however, if you’re converting farm buildings, such as barn or stable, permission is required for the change of use and any building works associated with the conversion.

It goes without saying that the location of your furnished holiday let should be in a great location, somewhere you would want to stay if you went on holiday; an unobtrusive, well-placed area with access to power and water.



When you do decide where your furnished holiday let is going to be, you should involve building planners early and establish the boundaries of your project, such as budgets, application and whether or not your initial ideas and considerations work in the area you’ve selected. Once all of this checks out, you can really start thinking about design. By going into the project with a clear idea and design in mind, you’ll minimise your costs by avoiding planning applications that have little chance of being approved or worse, you complete the works and the property doesn’t have quite the demand you expected; in this instance, you may have no choice but to consider long-term tenants (though even this may be unsuitable) or selling the property.

Whilst some would say you need Wi-Fi, smart TVs, a reliable mobile signal, high-quality beds and linens, open fires, wood burners and all the bangs and whistles you’d find in the likes of Burj Al Arab, the seven-star hotel in the United Arab Emirates, we feel much of this is unnecessary. In the digital world, Wi-Fi, good mobile signal and at least a TV with Freeview, in our opinion, is a must, alongside a sturdy bed, comfortable mattress and clean linens (which will need to be washed between guests, obviously) however, a smart TV, wood-burner, etc are unnecessary costs unless that is the sort of luxury you’re looking for, in which case, the premium you charge for such luxury will be according to the level of quality. However, Harry Albert Lettings & Estates have received exceptional results from a double room in Nottingham which is furnished with a bed, bedside cabinet, 32inch TV and canvas wardrobe; the homeowner regularly earns upwards of £723 per double room per month, however, this isn’t considered a furnished holiday let because it is in the homeowners personal residence.  It does go without saying that quality is a crucial ingredient for maximum occupancy and in turn, increased revenues.

Guests often look for a home-from-home but you can offer your guests as little as possible on a self-catering basis, however, failing to provide crockery, cutlery and a tin opener with an under-equipped kitchen isn’t going to do you any favours. Future guests rely on reviews and you should approach furnished holiday lets as such; you should always ask yourself how you would feel if you had no choice but to stay there for a month, would you be able to function properly as an adult? Cook your meals, entertain yourself, microwave a bowl of baked beans from a tin without a ring pull, also, don’t forget the fridge…

The largest benefit of Furnished Holiday Lettings, especially if you have a second property of high sentimental value, is that you don’t have to pay council tax. A self-catering accommodation which is available for short-term lettings for more than 140 days in any given year, is subject to Business Rate property tax. Since all FHL properties must be available to let for a minimum of 210 days, they fall into this category. However, this isn’t necessarily bad news as you can claim Small Business Rate Relief, which can be up to 100% (dependent on what area you are in). Therefore, goodbye to council tax!

Another benefit is flexibility; flexibility works both ways with Furnished Holiday Lettings. Some landlords may want to sell their property, but not right away. Obviously, they have the option of leaving their property empty, but that’s not exactly shrewd business! So, they offer the property as a short-term let.



Taking on tenants for a shorter period gives landlords the opportunity to take stock of how the market’s performing and assess their own personal financial situation too. Should they need to, a short-term let allows them to sell their property without having to wait for a long tenancy to come to an end.

How to qualify as a Furnished Holiday Let

Furnished Holiday Lets reap tax-benefits and apparently benefit from lower maintenance. The property must be located in the UK or the European Economic Area (although this could change after Britain leaves the EU); it must be furnished for normal occupation and commercially let with the intention of generating a profit. The property must be made available for at least 210 days per year and occupied by guests for at least 105 days.

The days you or your friends and family spend in the property will not count towards these requirements but there is some flexibility if you can’t meet the required occupation figures if you have multiple properties in the same area or multiple rooms in the same property that are furnished holiday lets. In these cases, the figures will be averaged out across the properties/rooms.

For the first 12 months, your Furnished Holiday Let will effectively be in a probationary period, during this time, the potential and actual availability of your property will be reviewd and the status will only be granted if the property is available for 30 weeks (210 days) per year, let commercial and occupied for 15 weeks (105 days) and must not be occupied by the same people or person for any more than 155 days in total per year (so, you can have someone move in and out between new guests), nor does it count if you, your friends or family stay in the property and pay a discounted rate.


If, after the ‘probationary period’, you fail to meet the actual occupation figure but you met the occupation requirement the previous year, a grace period may be granted for up to two years meaning you’ll retain the status of Furnished Holiday Let but you will lose this status and all tax benefits should you fail to meet the occupation requirements going forward. However, Harry Albert Lettings & Estates will be happy to discuss your options with you in these instances.

 

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