Holiday let owners can avoid tax by offsetting capital allowances against their total income from salary and dividends paid in the UK, as well as rental income.
But you’ve got to be quick. To save tax, you must make your claim before 5 April 2011, as the government is planning to end the possibility of holiday home owners being able to offset these tax-saving allowances against income earned in the UK.
According to John Davies, managing director of the niche property tax specialists Hedge Tax Mitigation, over 97% of holiday home owners don’t know about this tax-saving tip as this area of property taxation is so specialist.
As a result, millions of pounds have remained unclaimed by owners of holiday lets.
“It is possible that between 20 and 30% of the purchase price of a property could be claimed as capital allowances, which on a property bought for £250,000, could mean a tax saving of £15,000 to £37,500. These are large sums and the owner has an entitlement to claim them,” says Davies.
These sizeable amounts of money as tax allowances could help significantly owners of holiday lets who are struggling to retain their holiday homes due to the weak pound and lower occupancy rates.
Davies explains, “In these austere times as the government looks to raise revenue, holiday homes, as well as buy to let portfolios are coming under the government spotlight. Irrespective of when they bought their property, owners need to stake their claim now before the legislation changes, or this money, which is rightfully theirs, will be lost forever”.
The tax-saving allowance lets holiday let owners claim tax allowances against items which may not have been claimed for by their accountant, such as electrical cabling, kitchen fixtures and fittings, plumbing, air conditioning, and many other items integrated into the fabric of the building.
To qualify as furnished holiday lets, holiday homes must be furnished and based in the UK or the European Economic Area (EEA).
Holiday homes must be available to let to the public as holiday accommodation for at least 140 days a year and must be actually let for at least 70 of these days at market rate.
Once a tax claim is made, it can be used to claim back tax that has been already paid or to reduce tax due in future years.
However, holiday let owners must get expert tax advice as claiming capital allowances is a specialist area.
- Time running out on tax-saving holiday let relief
- Download our solicitor-approved Holiday Letting Agreement
Published on: January 26, 2011