Paying Tax On Renting Out Your Holiday Home

Seemingly as with most tax issues, it’s very confusing, so we’ve produced a simple guide below.
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Holiday Home Tax Tips

When you start renting out your holiday home it’s important you tell the tax man otherwise you could be liable for fines. HM Revenue and Customs have all the details on their website but seemingly as with most tax issues, it’s very confusing, so we’ve produced a simple guide below.

1. You must cover your income on a Self-Assessment tax return, if the income is between £2,500 and £9,999 after allowable expenses.

2. Allowable expenses include furnishings, letting agents’ fees, advertising, maintenance and repairs (but not improvements), utility fees and council tax, plus service providers like gardeners and cleaners.

3. Home insurance is an allowable expense and it’s absolutely essential you protect yourself with an insurance policy that covers holiday lets. Our holiday home insurance includes public liability insurance up to £5 million, 24/7 UK helpline, and vacant house insurance is available between lets.

4. You can also count ‘wear-and-tear’ of many items such as furniture, white goods and your TV. You can claim 10% of the value of these items as ‘capital’ expenses every year.

5. To work out the taxable income.
a. Add up all your rental income.
b. Add up all the allowable expenses.
c. Minus your expenses (b) from your income (a).

6. After allowable expenses if your income is less than £2,500. Give the Self-Assessment Helpline a call on 0300 200 3310.

7. Due to the cost of setting up a holiday let, you may make a loss in your first year. This loss can be carried into the second year for tax purposes.

8. If you are a husband and wife team your taxable income can be allocated between you, as you see fit.

9. If renting out a holiday home is your full time job then factors such as National Insurance come into play and we recommend you get professional advice. This is particularly the case if you own more than one holiday let.

10. No booking can exceed 31 days. If it goes over 31 days then you’re into landlord territory and different rules apply. It also needs to be available for 210 days and let for at least 105 days to be eligible.

Now this all sounds like a lot of work but if you meet the eligibility criteria, you will be taxed at a much lower rate than the tax you pay on your main salary, so it’s well worth the effort. In the long run, if you sell the property having met the eligibility criteria you will also benefit from various forms of Capital Gains Tax reliefs.

Some of you may be thinking the tax man doesn’t have to know, shouldn’t I just keep quiet about it? Apart from the moral implications of not paying, if you do get caught you may face substantial fines, particularly if HMRC can show you advertised the property online.


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For further reading HMRC guides, visit these two sites:
https://www.gov.uk/renting-out-a-property/paying-tax

https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet/hs253-furnished-holiday-lettings-2015