If you are a property investor you may be wondering what makes a Furnished Holiday Let a good investment and whether it is right for your investment portfolio? Read on to find out more about this attractive investment opportunity.
In a world of constant change, investors are always searching for the most tax efficient way make on their returns and gains. Property investors are no different and with Brexit, changes to stamp duty and the way property is taxed, Furnished Holiday Lettings is thought to be the next buy-to-let property boom. Here are three reasons why a Furished Holiday Let is considered a great investment opportunity at the moment:
Furnished Holiday Lettings are considered a trading business so and benefit from many of the commercial property tax breaks that exist, contributing to them being a good investment.
If you operate under the Furnished Holiday Letting the current Tax Rules mean you can not only offset all your property expenses against your rental income including mortgage interest – something which the Government is scaling back on for traditional buy to let properties over the coming years which will mainly affect higher and additional rate tax payers (those paying tax at 40% or 50%).
So, for example, say you are a higher rate tax payer if you own a Furnished Holiday Home and paid £12,000 each year in mortgage interest, on your personal tax return you would be able to claim for this expense and save tax of £4,800. Unfortunately for many traditional residential buy to let landlords this relief is being phased out and will not exist by 2020/2021.
Another great tax break making a Furnished Holiday Let a great investment, is that since they are considered a business by HMRC they also qualify for Entrepreneurs Relief. This relief potentially can reduce the amount of Capital Gains Tax payable to potentially 10%. Compare this to Capital Gains Tax payable by higher and additional rate tax payers of 20% or 28% and it is clear why Furnished Holiday Lets are becoming an attractive investment option.
Finally, although it can be a grey area and Furnished Holiday Lettings do not automatically qualify for, it is entirely possible to shield your investment for inheritance tax purposes with business property relief . Another tick in the box for Furnished Holiday Lets as an investment option instead of traditional residential buy to let.
Much has been said about people choosing to staycation due to recent events around the world, political changes and a weakening pound. The market for keeping your Furnished Holiday Let fully booked all year round has just got bigger meaning imporving your opportunity to maximise your return on investment.
Not only can you appeal to the staycationers, but apps like AirBnB make it possible for you to market your own property to a world wide market. You have complete control of when you take bookings and how you run your Furnished Holiday Let and if you have quiet times websites like latelettings.com you can choose to let your cottage out at a reduced rate to keep the cash coming in. After all 80% of your rental is better than 0% meaning you avoid rent free periods and again make the most of your property investment.