Tax For Furnished Holiday Lets | Expert Advice from PFK Francis Clark
If you are looking for important information about holiday homes and tax, we’ve teamed up with Steve York, Tax...
by Janine de Lange / Owner
As an owner, it is essential that you are familiar with the most up to date and relevant holiday let legal requirements. These rules and regulations for letting a holiday property are there to protect you, your guests and your property.
There is a lot to take into consideration and a fair number of legal requirements for holiday lets that must be adhered to for the safe running of your business. Whilst some laws might be obvious, others are less so. We’ve provided some guidance and useful information for owners to help understand what holiday let legal requirements are needed.
In this guide, we aim to cover everything from health and safety to holiday let tax, including your most frequently asked questions…
Use our quick links below to skip to a particular topic or read on for our comprehensive guide on the legal requirements for letting a holiday property.
Looking for more expert advice on holiday letting and what rules and regulations you need to be aware of? Give us a call on 01326 336773 or download our free owners guide for more information.
Letting any property means that you are obliged to adhere to certain rules and regulations. But, there are different legal requirements between renting a property on a long-term basis than that of a short-term period. So, it’s important to understand what is classed as a holiday let.
A holiday let is a self-catering property that is rented out to guests for short periods of time. Generally anything between a few days and a calendar month. A holiday let is usually furnished and decorated to a high standard and equipped with everything needed for a stay away from home.
A Furnished Holiday Let is a specific category of rental property that allows you as an owner certain tax advantages and benefits. To qualify as a Furnished Holiday Let (FHL), you will need to meet specific criteria and occupancy conditions.
For a detailed look into more about qualifying as a Furnished Holiday Let, visit the HMRC guide on the topic.
A crucial element to consider when running a holiday let is that you will be responsible for the health and safety of your guests. When letting out your property, you have a duty of care to your guests to provide safe accommodation and do all you can to minimise the risk from potential hazards.
Part of this process is to inspect your property regularly and conduct a safety assessment. It’s recommended practice to have an information folder for guests with details on any issues they need to be aware of, as well as instructions on how to safely use appliances and facilities. By ensuring your holiday let is a safe environment, both you and your guests can relax in the knowledge that potential risks have been minimised. As long as you follow the correct health and safety guidance for your property, and have any maintenance work done by competent authorities, you can rest easily knowing your guests will be safe.
To help you with a risk assessment and plan of action for your property, the Health and Safety Executive (HSE) has resources for businesses.
If you provide holiday accommodation in England or Wales for paying guests, it’s a legal requirement to carry out a fire risk assessment. Under the Regulatory Reform (Fire Safety) Order 2005, you are responsible for taking measures to protect those staying in your property from the risk of fire.
If you supply any equipment such as fire extinguishers or fire blankets, ensure this equipment is checked regularly and there are clear instructions on how to use these items for your guests.
If you provide self-catered accommodation containing upholstered furniture, you must abide by the Furniture and Furnishings (Fire) (Safety) Regulations 1988.
The type of automatic detection and fire warning system that you will need to install depends on the size of your property. If you are unsure about which system your property needs, your risk assessment should help identify this.
As a holiday home owner, you need to comply with the relevant gas and electric safety regulations.
You are responsible for the safety of your guests and are required, by law, to comply with the relevant gas regulations. Under the Gas Safety (Installation and Use) Regulations 1998, all gas appliances, fittings, chimneys and flues should be maintained and are be in a safe condition
You must obtain a gas safety record (also known as a CP12 certificate) by maintaining and servicing gas appliances by using a Gas Safe registered engineer for all pipe work, gas appliances, flues and LPG installed at your property.
It is also best practice to install a carbon monoxide detector in every room where gas or oil is burnt and in rooms where there is a wood burner or open fire.
Electrical safety is considered to be essential in a holiday cottage. Faulty electrics can lead to fires, injuries and even more serious consequences. It’s your duty of care to make sure that your property is a safe environment for guests.
As an owner, you are required by law to adhere to the necessary electrical safety regulations as set out in current standards as governed by the Electricity at Work Regulations (1989). The legislation states that all electrical systems in a property must be maintained to avoid danger to all who use the premises.
As with any home, holiday properties will be subject to wear and tear and electrical installations are likely to deteriorate over time and with frequent use. You are required by law to ensure that all electrical appliances, circuits and fixed installations within your holiday let are safe and are not hazardous to your guests.
You should perform regular visual checks of electrical items to make sure that they aren’t deteriorating due to wear and tear, and Portable Appliance Testing (PAT) at a minimum of every five years.
Holiday cottages with hot tubs and swimming pools are more popular than ever, often increasing bookings and income. But both can become a danger and risk to guests if they aren’t maintained and adequate safety measure put in place.
As with other potential hazards in your holiday let, you should undertake a thorough risk assessment of your swimming pool and hot tub. Make sure you understand how to operate and maintain these for your guests. By following a few simple steps and guidelines, it allows you to ensure that you are compliant.
Follow the HSE swimming pool health and safety guidelines for additional tips to keep your property safe for guests.
The Health & Safety Executive has published guidance on hot tub safety for anyone responsible for managing one as part of a business activity. To comply with legal requirements as well as limiting the risk of infection, you will need to ensure that the hot tub you purchase is HSG282 Compliant.
There are a several tax implications unique to a buying, running, and selling holiday let business. Here we provide an overview of some of the taxes that you are obliged to pay.
This is a special tax rule on rental income for properties that have qualified as a Furnished Holiday Let (FHL). Most holiday let owners are required to complete a self-assessment by the end of January each year. The income your make from letting your property will determine the income tax and National Insurance contributions you will need to pay.
At this stage you will want to make sure that you are complying with all legislation and rules regarding furnished holiday lets. Read our article Furnished Holiday Let tax guide to check you’re on the right track.
Self-catering properties will be liable for paying either council tax or business rates. Whether you pay business rates on your holiday let will depend not only on how many days your property is available to let each year, but not also how many days it was actually let. If you do not qualify to pay business rate, you will need to pay council tax until the property meets the eligibility rules.
If you want to know more about how much tax you would need to pay in your area, contact your local council for specific details.
Purchasing any property that is in addition to your main residence, will have an additional Stamp Duty charge known as Higher Rates on Additional Dwellings tax (HRAD).
This form of tax starts at 3% and then rises in bands, climbing to 15% for the most expensive properties. Visit the HMRC website for more details.
If your holiday home qualifies as a Furnished Holiday Let, it is classed as a business. And while there is no legal requirement to have a business bank account for your holiday let, it is essential to keep an accurate account of income and expenditure relating to your business. The easiest way to do this is to have a business bank account.
Having a business bank account makes it easier to track income and expenses, all of which must be declared to the Inland Revenue (HMRC). Keeping your holiday let finances separate, in a designated account, will make it easier to manage.
Read our guide to holiday let costs to get a better idea of what expenses you should expect to budget for.
Letting out your holiday home to guests means you are responsible for ensuring that not only is your property protected, but your guests are taken care of should anything happen.
A standard home insurance policy is not sufficient to cover your holiday let. You’ll need to get a specialist policy that will cover a multitude of elements that a regular home insurance won’t.
Policies typically cover accidental damage, loss of rent as well as periods when the property is unoccupied. Although not a legal requirement, having public liability insurance cover of £2 million, is also an advisable requirement for running a holiday let business
Yes, holiday lets require a specialist mortgage. A traditional residential mortgage will not be suitable. A holiday let mortgage is a form of lending which is specifically designed for an owner to borrow money in order to purchase a property that will be for personal use, as well as let out on a short-term basis for holiday guests.
Understanding the difference between the types of mortgages available to you as a holiday home owner is imperative. There are implications involved in which costs can be offset against profit as well as far more stringent assessment criteria if applying for a buy-to-let.
Read our guide on financing a holiday home to find out more about holiday let mortgages.
Within the UK and Ireland, there are different rules to follow regarding new and refurbishment works and its best to make sure that your builder is aware of the current rules and regulations.
Planning permission is generally not required when buying and running an existing holiday let. It may however be applicable if you’re starting a new business, converting or extending your property.
If any of these apply, you may need to submit a ‘change of use’ application for your property. Always contact your local planning and building control departments prior to carrying out any structural changes within your property.
For more information, read the official government guide to planning permission or visit the planning portal to find out whether you’ll need an application.
Yes, you need a TV licence for your property if you have a device where guests can watch or stream live TV. For holiday lets you’ll need a special type called a Hotel and Mobile Units Television Licence (hotel licence). Visit the TV licensing website for more information.
A single TV licence costing £157.50 will cover up to 15 accommodation units on an individual site. If you have more than one holiday cottages in different locations, you’ll need a separate licence for each property.
If you provide a selection of DVD’s for your guests to use, you will also need a license. Providing films to paying guests without a licence is an infringement of copyright law (the Copyright, Designs and Patents Act 1988).
Many owners consider providing complimentary drinks in their welcome pack. As first impression go, it seems a relatively simple way to welcome guests to your property by providing a bottle of wine or locally brewed beer. But many owners may not be aware of the alcohol licensing laws when providing alcohol in a welcome pack.
The 2003 Licensing Act states that you must have both a Personal Licence and a Premises Licence in order to provide alcohol. This is even the case if you have provided it as a gift and no monetary transaction takes place as it’s seen as part of the cost of the rental, rather than free of charge.
Read our blog on alcohol licensing in your holiday home more information on how ensure you’re aware of the relevant legislation.
Finding the right holiday letting agency in Cornwall for expert advice and support can make all the difference to help you achieve holiday let success. With over 700 self-catering cottages in locations throughout Cornwall, have the expertise and industry know how to help you run your holiday letting business.
We want letting your holiday home to be as enjoyable and effortless as possible for you so we’ve created some helping guides to answer any queries that you may have. Simply visit our Owner Advice Page to find out more.
If you would like to find out more about letting your holiday home, request your FREE owner’s pack or give us a call on 01326 336773 (option 2) today.
*At the time of writing Cornish Cottage Holidays has taken all reasonable care to ensure that the information contained in this article is accurate. This article contains generic information, so we cannot guarantee or represent that it is complete or free from errors or inaccuracies.
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by Janine de Lange / Owner
I’ve had the privilege of living in the beautiful South West since 2010, and in my opinion there’s no better place in the worl...
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