How to have a hol­i­day all year round

Re­cent changes in tax and stamp duty make hol­i­day lets even more at­trac­tive ren­tal in­vest­ments

EADT Suffolk - - Property -

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.Š 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

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