What are Holiday Let Business Rates ?
When deciding to rent your holiday home it can be easy to get excited about the potential earnings and fantastic feedback, however, it is also important to consider your outgoings, including holiday let business rates…
Holiday let business rates and taxes are not dissimilar to council tax, they must be paid on most properties that are being used for commercial use rather than residential. They are used to help pay for local services.
You will be required to pay business rates on your holiday home if it is available for short-term letting, for periods totaling at least 140 days per year. These are calculated on your property’s rateable value.
How to calculate your Holiday Let Business Rates?
To calculate your business rates, first take your property’s rateable value provided by your local council and then use the relevant business multiplier to work out your business rates.
There are certain holiday let business rates and tax reliefs you can benefit from, such as Small Business Rates Relief, as well as advantages for properties that qualify as furnished holiday lets. The small business relief means many smaller cottages fall under the threshold and don’t pay any business rates.
If your property’s rateable value is more than £51,000 you must use the standard multiplier, if it is less you can use the small business multiplier which works out slightly less.
Please see the Government website for current guidance.
| Year |
Small Business Multiplier
(RV: £0 – £49,999) |
Standard Multiplier
(RV: £51,000+) |
| Since 2020 |
0.499 |
0.512 |
For example – If your property’s rateable value is £70,000 you would qualify for the standard multiplier, therefore the calculation would be 12000 x 0.512 = £6,144.
How do you qualify as a Furnished Holiday Let?
A Furnished Holiday Let (FHL) is a rental property that can provide tax benefits to owners. To qualify as a Furnished Holiday Let, your property needs to be:
- Fully furnished
- Available to let commercially for 210 days per year, with the intent to make a profit
- Let out for at least 105 of these days
- Not occupied by long term tenants (more than 31 days at a time) for more than 155 days per year
If your property follows these criteria and therefore qualifies as a Furnished Holiday Let, then you will be liable to pay business rate property tax rather than council tax.
The benefits of a Furnished Holiday Let…
- You can claim capital allowances on your property, meaning you can deduct costs such as furnishings and décor from your pre- tax profits.
- Income generated from a FHL property is classed as “relevant earnings” for pension purposes.
- You can split the profits of a FHL between yourself and your spouse flexibly for tax purposes – unlike with longer-term rental properties, where profits are divided based on the official ownership split.
- When you sell your property, you can claim certain Capital Gains Tax relief please refer to current information on the Gov website
When it comes to expenses, your FHL property is treated similar to that of a business. This basically allows you to offset expenses against your revenue. Two crucial points are:
Expenses claimed must be against commercial use only so if you, your family or friends use your property, your expense will be partly considered as “private use”, which means that you will need to calculate what percentage of the expense is commercial. For example, if you use the property privately for 3 months of the year, 75% of your expenses will be considered commercial.
Expenses must not be capital, for example, one-off payments for the purchase or construction of the property, or for its fixtures (capital allowances could cover these expenses). Here are some examples of allowable expenses:
- Utility bills or refuse collection
- Interest on loans associated with the property
- Advertising or letting agency fees
- Products bought for the property (such as cleaning products and welcome packs)
- Maintenance and cleaning costs
For further guidance please refer to the appropriate section of the Gov website.
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Get in Touch...
Making the decision to let your holiday home can be daunting but rest assured we’re close by with guidance, ideas, and suggestions along the way ensuring you’ll always remain on track.
Holiday at Home is the booking agent for a unique collection of luxury holiday properties. If you are considering becoming a new holiday home owner or need any assistance, then please do not hesitate to contact our friendly team.
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