Buy Holiday Cottages at The Bay for Significant Tax Advantages

Take a tax break

Buy-to-let holiday homes have become far more attractive after a government U-turn. So where should you invest?

People who let out holiday homes have been given an unexpected present by the taxman — courtesy of the general-election campaign. Plans by the government to withdraw tax breaks for properties made available on a short-term basis have been abandoned as part of a deal with the Conservatives to push through Alistair Darling’s budget before parliament rose for the recess.

Britain’s holiday-home industry had been lobbying hard against the changes, which would have taken away the various tax advantages enjoyed by holiday homes over conventional buy-to-lets, effective from 6th April 2010. The plans have now been put on hold.

“This is potentially an extraordinary reprieve for self-catering tourism, local economies and British holiday-home owners who earn their livelihoods from running holiday-home letting businesses,” says Ross Elder, managing director of Holidaylettings.co.uk.

The tax breaks on offer to holiday landlords are complicated, but one of the main advantages is that anyone making a loss on their rental business — that is, where mortgage interest and other costs exceed their rent over the year — can offset this against income earned elsewhere, even their salaries. There are benefits, too, for capital-gains tax and various capital allowances.

To qualify, properties must be let out for at least 10 weeks (70 days) a year, must be available for letting for 20 weeks (140 days), and not be let to any one person for more than 31 days. They need not be in the UK, either; homes in other EU countries also qualify. However, if you buy overseas, you should bear in mind you will also be subject to that country’s tax regime.

Jonathan Cunliffe, director of the Truro office of Savills, expects the move to give a further boost to the market in Devon and Cornwall, traditional holiday-home territories, where prices have already rebounded strongly from lows hit in 2008. He expects it to benefit particularly the many people who bought properties primarily for their own use during the boom years and have been obliged to let them out to help pay their bills.

“The holiday-lettings market is very strong at the moment because of the weak pound and more people choosing to holiday in Britain,” says Cunliffe. “A lot of clients with homes down here manage to let them out for 30-40 weeks a year — 20 weeks is very conservative. It’s not just summer holidays: there’s Easter fortnight, half-terms, and then there are retired people not constrained by time.”

Laurence Corrigan, director of The Bay Filey, also welcomed the changes and is encouraged by the growing holiday home buy-to-let market adding; "I would endorse Savills' view as, in my opinion, buy-to-let holiday homes offer the prospect of much bigger returns and brighter futures for investors than traditional buy-to-let properties."

So what should you buy — and where? A good rule of thumb is to choose somewhere you would like to spend holidays yourself, which often means on the water or a short walk from it, or in beautiful countryside. It also helps if the properties are attractive. Two-bedroom properties tend to be most in demand, although ideally with a sofa bed in the living room allowing you to squeeze in a few more people.

To find out more about buying to let at The Bay Filey and the significant tax advantages available contact our sales team advisors on 0800 6 121 621 or +44 (0) 1723 518 130.