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Staycation Boom & Tax Relief

Since late 2020 there has been surging demand and high returns for holiday-let investments in the U.K as the staycation boom took hold.

During the first six months of 2021, there were 1,404 new holiday let businesses set up in England, Wales and Scotland. This is the highest figure since records began back in 2007, according to research by estate agency Hamptons.

This is 83% growth on the number of holiday let businesses set up in 2020. And it’s 119% more than in 2019!!

And with the rise of platforms like Airbnb and BDC its never been easier to market to short term guests.

Whilst a small number of these new businesses were set up using a limited company structure, most were second home owners who will now have to pay tax on profits personally at either 20%, 40% or 45%.

This is where capital allowances can help as making a claim can save owners of furnished holiday lets on average £32,000 in tax.

Capital allowances are given on plant and machinery that is used for the day to running of the business and includes items such as: kitchen and bathroom suites, heating systems, electrical and lighting installations, window blinds, smoke alarms, carpets, external security lighting and more.

Capital allowances can be claimed against the purchase price of the property and in most cases up to 30% of the purchase price can be attributed to plant and machinery.

Capital allowances can also be claimed on refurbishments, extensions and new builds and can be worth between 50% - 75% of the costs incurred.

In order to qualify to claim capital allowances the following must be met:

1) The property needs to be advertised for let for 210+ days per year,

2) The property needs to be let for 105+ days per year,

3) No guests to stay longer than 31 days.

The benefits of making a capital allowances claim include reduced tax bills, possible HMRC tax credit and increased cashflow all resulting in more profits being retained in the business.

Now is a great time to assess your property for capital allowances with January and the filing deadline just around the corner. You can check if you qualify by using our simple "do I qualify" link below.

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