New holiday home tax

Tuesday, August 03, 2010

New holiday home tax

Tens of thousands of Brits who own holiday letting homes abroad face paying more tax as part of a government crackdown on second homeowners.

Tax concessions which allow holiday homeowners to offset losses on their property letting business against other income will come to an end for many Brits after April 2011.

Currently, holiday letting is considered a trade by the UK tax man, permitting homeowners to offset any losses such as running costs, mortgage interest, insurance, advertising and maintenance, which may be over the rental income, against other personal income.

But from next April, losses derived from a shortfall in rental income can only be offset against profits from the letting business. Furthermore, for a home to qualify as a holiday let, the property must be made available to let for a longer-term.

To qualify as a holiday rental business, the property must be made available to let for a minimum length of 210 days per year, extended from 140 days a year.

Additionally, some homeowners may have to pay more money in capital gains tax (CGT) - 28 per cent CGT instead of 10 per cent CGT - when they sell their home in the future, if their property does not qualify as a holiday let.

To read previous articles on letting your property, click here


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