How to have a holiday all year round
Recent changes in tax and stamp duty make holiday lets even more attractive rental investments
IF you’re one of the many who have returned from your summer holidays wishing that you could live like that year-round, you’re not alone. And for a growing number of investors, having a Suffolk holiday let means just that – allowing you to enjoy a ‘home from home’ when you’re holidaying in it, while delivering solid returns when you’re not.
Recent changes in tax and stamp duty now mean that the returns offered by holiday lettings can outstrip those in the residential lettings market. Holiday lets are the new buy-to-lets.
“Depending on the individual property and its location, holiday home landlords can now earn up to three times more in rental income than their buy-to-let counterparts,” says George Bradley, general manager of Suffolk’s largest holiday lettings agency, Suffolk Secrets, “even after running cost and agency fees are taken into account.”
Lizzie Hammond, manager of Suffolk Cottage Holidays, agrees.
“Whether you’re considering a holiday hotspot, or a remote but stunning location, the yield on outstanding properties can not only provide substantially more income than comparable investments, but give you effectively ‘free’ holidays and an accruing asset.”
THE RISE-AND-RISE OF THE STAYCATION
The financial crash of 2008 kick-started an increase in ‘holidaying at home’, and the staycation market has grown every year since. Suffolk Secrets, for example, now hosts over 50,000 holidaymakers a year, up 10,000 since 2015, an increase George Bradly attributes to Brexit, security fears abroad, the weakening of the pound, but also the quality and number of holiday homes on the market, which in Suffolk has soared in recent years.
WHY HOLIDAY LETS ARE THE NEW BUY-TO-LET
Changes in tax relief, capital gains and stamp duty have been the main drivers behind the increase in those investing in the holiday lettings market since April this year.
Chris Scargill, tourism and leisure partner at Larking Gowen Chartered Accountants and a specialist in furnished holiday lets (FHL’s), says: “For some time now, FHL’s have benefitted from a range of tax reliefs which go beyond those available to the traditional buy-to-let property, leading to a number of property investors choosing this type of letting over buy-to-lets. For example, until April 2017, residential landlords were able to claim tax relief on their mortgage interest payments at their marginal rate for tax. Now, residential landlords are only able to claim a flat rate of 20% whilst FHL’s (Furnished Holiday Lets) are still able to claim 40%.”
Another key advantage of FHL’s compared to residential lettings is a reduced rate of capital gains tax on disposal, 10% (as long as certain conditions are met). Further, FHL owners have the ability to potentially claim capital allowances on furnishings and appliances.
Profits from holiday lettings also count as earings for pension purposes, allowing a landlord to contribute more towards a pension pot each year while still being able to use the property and maintain the reliefs available.
Similarly, since April 2017, an increase in stamp duty of 3% for anyone buying a second home means investors are looking to recoup that initial purchase ‘loss’ by seeking the best returns available. For further advice on holiday lettings, contact Suffolk Secrets on 01502 722717 or Suffolk Cottage Holidays on 01394 389189
Investor’s delight, The Great House, Orford, holiday let available through Suffolk Secrets