What is Changing?
From April next year, the Furnished Holiday Let (FHL) status, which many holiday homeowners have enjoyed for tax purposes, will be ending. As a property owner, this change means you’ll need to reassess how your holiday home is classified for tax and business purposes.
For years, FHL status has provided valuable tax benefits, allowing holiday homeowners to qualify for capital allowances, tax relief on profits, and even reduced Capital Gains Tax on the sale of the property. However, starting in April, the FHL classification will no longer be available.
This change will affect how your holiday property is taxed and managed unless you take proactive steps to reclassify it.
To help you prepare for this transition, we’ve outlined the key points below, including the benefits of moving your property to business rates, and how to make this switch.
Why Should You Consider Moving to Business Rates?
One alternative to FHL status is to move your property onto business rates. While it may seem daunting at first, there are several benefits to switching your holiday home to business rates rather than sticking with standard council tax:
1. Small Business Rates Relief
If your holiday home has a rateable value below a certain threshold, you may qualify for Small Business Rates Relief. This could result in either a significant reduction in the amount you pay in business rates or, in some cases, no business rates at all.
2. VAT Registration Threshold
If you choose business rates and your turnover remains below the VAT registration threshold (currently £85,000), you may not be required to charge VAT on your bookings, which can be beneficial when it comes to pricing your property competitively.
3. Tax Deductions and Business Expenses
Operating under business rates allows you to claim various business-related expenses such as marketing costs, property maintenance, and services, which can help lower your overall taxable income.
4. No Council Tax
Once your property is moved onto business rates, you’ll no longer be responsible for paying council tax on it. If your property is available to let for at least 140 days and actually let for at least 70 days a year, it will be considered a business.
5. Support for Growth and Expansion
Business rates classification may also make it easier to access certain grants, government relief schemes, and support services available to small businesses.
How to Make the Switch to Business Rates
Moving your holiday home from FHL or council tax to business rates involves a few steps:
1. Check Your Property’s Eligibility
To move to business rates, your property must be available to let for at least 140 days per year and actually let for at least 70 days. Keep records of bookings and availability to ensure your property meets the criteria.
2. Contact the Valuation Office Agency (VOA)
You will need to inform the Valuation Office Agency (VOA) that your property should be classified as a self-catering business. They will assess the rateable value of your property based on rental income.
3. Apply for Small Business Rates Relief
Once the VOA has reclassified your property, you can apply for Small Business Rates Relief through your local council. Be sure to check whether your property qualifies for this relief and submit the necessary forms to avoid paying more than necessary.
4. Get Professional Advice
It’s a good idea to consult with a tax advisor or accountant to ensure that moving to business rates is the best option for your property. They can help you understand the financial implications and guide you through the process.
Need Help?
The team at Curated Spaces are here to support you through these changes. If you have any questions about moving your property to business rates, or if you’d like guidance on the process, please don’t hesitate to contact us. Our team is ready to assist you in navigating the transition smoothly and ensuring you continue to maximise the benefits of your holiday home.
For more information, please get in touch via [email protected]
Take action soon to ensure your property is prepared for the April changes and set up for continued success!
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