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The Ins And Outs Of Getting Your Taxes Correct

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Furnished Holiday Let Tax Guide – Updated 2023

Let’s face it, we all know the advantages of running a holiday let – mostly being the lucrative additional income it provides, but in this guide, you’ll learn a not-so-well-publicised advantage of owning a furnished holiday let (FHL) and what it means for your taxes.

But seeing as 20% to 45% of your profits are paid in taxes to HMRC, holiday homeowners must ensure they are paying the right tax.

Holiday lettings benefit from favourable tax treatment, with the most valuable being that you can claim capital allowances on the part of the purchase price paid or the costs to refurbish it. But few owners we meet have either underclaimed or not claimed at all, meaning they’ve missed out on thousands of pounds in tax savings.

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30. March, 2023.
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Christine James
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27. February, 2023.
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Jack Beattie
Jack Beattie
22. February, 2023.
Thank you to everyone at Helloguest, appreciate all the help getting my property listed and booked out for the periods when I'm away. Veronica and Emily helped me get things set up and gave good advice on how to best furnish the flat including getting a sofa bed for extra guests. Customer service have always responded quickly and blocked dates for my stays. Would recommend to anyone looking for an Airbnb or short term rental management service.
Mariann Komar
Mariann Komar
24. January, 2023.
As a property owner it took a lot of time and work to manage bookings. Now that I found Helloguest I don't have to worry about anything while I'm abroad. They organize cleaning, take care of the guests and solve the maintenance issues. They also manage and advertise my place on many platforms. I can honestly recommend them because I'm very happy with their service. I know my place is in good hands.
Peter Hudson
Peter Hudson
24. January, 2023.
Helloguest have been managing my property for a number of years and I have found them to be honest, efficient and helpful. I would recommend them.
B Sykes
B Sykes
14. December, 2022.
I switched to HelloGuest after using another agency, which almost put me off Airbnb for good. Toby and Veronica however, have been incredible in turning things around. Property was managed well, cleaning all taken care of and looks like guests couldn't be happier. Would 100% recommend their services to anyone in need of Airbnb management in London or beyond.

Certain Rules Apply

If your rental property is a furnished holiday let, you’ll be awarded a special classification that provides certain tax advantages for owners. However, for this classification, your property must meet specific requirements dictated by HMRC, like availability (210 days), bookings and level of furnishings.

An experienced holiday letting agency, like ourselves, can advise you on how best to achieve this. Get in touch.

Deductible Expenses

As mentioned above, capital allowances can be claimed against your furnished holiday let, which provides tax deductions for assets used within your holiday let business. Bear in mind this is not an option for long-term rental properties.

Capital allowances can be claimed on furniture, furnishings and ant equipment you purchase for the property. Costs attributed to renovation, refurbishment, repairs, plumbing, wiring, etc, can even be claimed on part of the property’s original purchase price.

Claiming capital allowance can significantly reduce the tax payable on your holiday profits, which will help you see a bigger investment return.

Allowable Expenses

  • Utility bills and refuse collection
  • Interest on loans associated with the property
  • Letting agency fees or advertising
  • Products bought for the property, like cleaning products and welcome packs
  • Maintenance and cleaning costs
  • Insurance, public liability, buildings and content insurance
  • Travel and subsistence

Other Benefits

  1. Income generated from FHL, classed as relevant earnings, means owners can make tax-advantaged pension contributions.
  2. When selling the property, owners can claim certain Capital Gains Tax reliefs.
  3. In the case of shared ownership, profits can be flexibly distributed between legal owners. With FHL, you can portion the profit however you like.
  4. Self-catered accommodation is available on a short-let basis for more than 140 days a year, is let for 70 days, and is subject to business rates as opposed to council tax. Here, you can claim Small Business Rate Relief, which can be up to 100%, depending on the property’s rateable value. In some instances, there would be no business rates to pay.

Business rates are calculated on the size, location, property type, quality and how much income you are likely to generate. If your value is below £12,000, you could be eligible for Small Business Rate Relief.

Changes in tax regulations in Wales mean that from the 1st of April 2023, properties must be available to let for 252 days and must be retained for a minimum of 182 days over 12 months. Properties unable to meet the threshold could face a Council Tax second homes premium, making boosting occupancy rates more important than ever. Some local authorities in Wales have premiums up to 150%.

Tax Information To Bear In Mind

  • If the turnover from your FHL portfolio exceeds £85,000, you must be VAT registered.
  • If you own one property and exceed the limit of £85,000, you would still need to be VAT registered, so make sure to do the math on your projections.
  • Generating an income from guests that exceeds £85,000 per year requires you to pay standard rates, 20% above the fee you charge guests to stay.
  • If you own and operate another VAT-registered business, your FHL might be subject to VAT, too.
  • Losses cannot be offset against other income. Instead, losses are carried forward and offset against future profits.
  • Expenses claimed must be against commercial use only – if your family or friends use the property, expenses are partly considered as private use. So, if you use the property for three months of the year, 75% of the expenses should be considered commercial.

Property Management Across The UK

Our service provides full UK coverage for short-term letting. Our Airbnb manager services extend to short, medium and long-term lettings to provide a full range of rental options to help homeowners and landlords maximise their earnings and minimise any problems. Visit this page.

We manage many rental properties in popular areas and tourist destinations. This includes accommodation in all the UK’s major cities and holiday destinations.

Contact us to find out more.

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Toby France

Channel Manager

Toby’s main role is managing clients with large buy-to-let portfolios and even clients just getting started to ensure they hit KPIs and maximise their monthly turnover.

Veronica Tribolati

Guest Communications

Being a natural extrovert and a go-getter, Veronica is a great communicator and is the face of HelloGuest.