There are special tax rules for rental income from properties that qualify as Furnished Holiday Lettings (FHLs).
If you let properties that qualify as FHLs:
- you can claim Capital Gains Tax reliefs for traders (Business Asset Rollover Relief, Entrepreneurs’ Relief, relief for gifts of business assets and relief for loans to traders)
- you are entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures
- the profits count as earnings for pension purposes
- The Interest Rate Relief Restrictions don’t apply – these rules only affect Buy to Let Investors
- Losses can be set against total income and are not restricted to the rental business; PIM4200 onwards deals with normal rental business losses and PIM4130 deals with furnished holiday lettings losses.
The letting condition
You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year (70 days for the tax year 2011 to 2012 and earlier).
The availability condition
Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year (140 days for the tax year 2011 to 2012 and earlier).
But the extra stamp duty will apply
The government proposes that properties bought as furnished holiday lets should be treated in the same way as all other residential properties – if the property is purchased as an additional property the higher rates will apply.
A Company could help you save tax
The current rate of Corporation Tax is 20% but its falling year on year and by 2020 it will be 18%.
Not only that, its the same rate no matter how many companies you have, previously when there were multiple Corporation Rate if you had associated companies the small companies rate was reduce in a marginal rate calculation.
Stamp Duty (SDLT) on selling Shares is 0.5%.
Example – So £1,995 × 0.5% = £9.97. This is rounded up to the nearest £5, which means you pay £10 Stamp Duty.
HMRC have a calculator, here is link
One of the big benefits of Shares is that its easy to split ownership.
Potentially Exempt Transfers (PET’s) allow you to give away shares provided you survive more that 7 years after the transfer, shares make PETs easy and simple.
When you give away shares it will potentially trigger a capital gain but you will be able to use your personal capital gains allowance of £11,100 to offset this gain.