Staycations and workcations are at an all-time peak, one in every ten addresses in England and Wales is a holiday house. As prudent investors, this might be the right time to explore the holiday lets market, let’s take a look..
Treated as a business
Holiday homes are categorised as a business and that means the tax laws are different from other types of property investment. For instance, business rates will be applied here in the place of council tax and rental income must be filed for annual tax returns.
However, there are some tax benefits which comes with being treated as a business such as Mortgage Interest tax relief, Business Rates relief, Capital Gains tax relief, and potentially the ability to claim most bills and maintenance costs.
Work more, earn more
The hands-off style won’t work here, you’ll have to either set up a trustworthy management team or get your own hands dirty! It requires constant monitoring, cleaning, maintenance, and it will require a significantly higher operational and management cost compared to a standard BTL.
Strategizing location
There will be higher returns if the property is set in a popular location with high traction. Lake District is one such place that can attract up to 40 weeks occupancy. Holiday lets along the coastal areas have seen an average of 7% spike in earnings. If it’s not a popular location, then the investor will have to make do with only seasonal income.
New changes!
Big changes were announced in the Spring Budget on 6th March – Tax breaks on furnished short-term holiday lets will not be in effect starting from April 2025, this way long term and short term holiday lets get the same treatment now, and number of houses available for long term lets will experience an increase now!
If you are an investor split between choosing either to invest in a holiday let or long-term investment property, it is necessary to weigh in these factors. Holiday lets generate higher margin income. For holiday homes have adaptable every-day pricing and for long term properties it’s a fixed monthly pricing. A successful holiday home has more possibility to generate more income than a long-term investment but also the risk of higher voids.
