One important aspect of a self-catering or holiday let business that should not be overlooked, is whether or not the owner of a holiday let is liable to pay business rates. Business rates are charged on non-domestic properties and help councils and local authorities to fund local services. The business rates are charged in place of council tax and may be less than the council tax bill. Qualifying owners may also be eligible for additional reliefs such as the small business rates relief.
If your property is in England or Scotland and available to let for 140 days or more per year, it will be rated as a self-catering property and valued for business rates. In Wales, business rate apply where the property is both available to let for 140 days or more per year and actually let for 70 days or more. There are different rules for properties in Northern Ireland.
Owners of furnished holiday lets can benefit from other tax reliefs that are not available to traditional buy-to-let owners. These include the availability of capital gains tax reliefs such as Business Asset Rollover Relief, Entrepreneurs’ Relief, relief for gifts of business assets and relief for loans. It is also possible to claim for allowable expenses and capital allowances for items such as furniture, equipment and fixtures. Profits from an FHL business also count as earnings for pension purposes.
Trading losses from a furnished holiday lettings business can only be set off against future, qualifying FHL profits.