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Tax on UK Lettings
For the latest copy of this information visit the DirectGov website hereTax on UK holiday lettings
If you let out a furnished holiday home in the UK, your rental income may be treated differently for tax purposes from other rental income. However, your property must keep to some rules known as 'qualifying tests'.
Rules for holiday lettings
To make sure your property counts as a holiday letting, it must be:
- in the UK
- furnished
- available for holiday letting to the public for at least 140 days a year
- actually let as a holiday let for at least 70 days a year (and these must be commercial lets not at cheap rates to friends and family)
The holiday lets must be (both):
- short term lets of not more than 31 days
- the only letsfor at least 210 days (211 days in a leap year)
Other restrictions
You can't let the property as a holiday let to the same person for more than 31 days in the year.
However, if you meet all the qualifying tests for 210 (or 211) days there are no restrictions on longer lets in the remaining 155 days But these longer lets do not count as holiday lets.
Working out your taxable profit
Your profit on UK holiday lettings is worked out in the same way as for other rental income, except that you claim 'capital allowances' rather than the 'wear and tear' allowance.
Examples of expenses that qualify for capital allowances include the cost of furnishings and furniture, and equipment such as refrigerators and washing machines.
You can learn more about capital allowances and working out profits for UK holiday lettings in our related article on expenses and allowances and in the land and property help notes of the Self Assessment tax return.
If your property doesn't qualify as a holiday let, you will be taxed as normal for residential property lettings.
- Expenses and allowances on income from property
- Download land and property pages help notes (PDF document 87K) (opens new window)
- Help with PDF files
Tax advantages of UK holiday lettings
With UK holiday lettings, you can realise a tax advantage if you make a loss on your earnings from the property, and when you sell the property:
If you make a loss
Any loss can be offset against your other income, not just the property income, reducing your overall tax bill. Or you can carry the loss forward and offset it against future letting profits.
Learn more about offsetting losses in the land and property help notes of the Self Assessment tax return (link above).
When you sell the property
You may be able to take advantage of Capital Gains Tax (CGT) reliefs, such as 'business asset roll-over relief'. For example, if you reinvest within three years in another UK holiday letting property or certain other assets costing the same as or more than you got for the property you have sold, you may be able to defer payment of CGT until you dispose of those new assets.
- Download HMRC helpsheet on business asset roll-over relief (PDF document, 60K) (opens new window)
- Help with PDF files
You may also pay less CGT when you sell a property you have used for UK holiday letting, compared with other residential let property. This is because a UK holiday letting property is treated as a business asset for the purposes of 'taper relief', so the more favourable rates of 'business-asset taper relief' may apply to any capital gain you make on the sale. The amount by which the gain is reduced by taper relief will depend on how long you have owned the property and how long you have used it for qualifying holiday letting.
To understand the rules fully, and find out about other reliefs you may qualify for, ask your professional adviser or Tax Office about CGT reliefs on the sale of UK holiday lettings property.
How to declare your income and expenses
You need to declare your rental income from furnished holiday lettings using the land and property pages of your Self Assessment tax return. If you don't receive one automatically, contact your local Tax Office, or register online at the HMRC website.
- Find your local Tax Office (opens new window)
- Register for Self Assessment Online (opens new window)
- How to file your tax return online
Allowable expenses
Some expenses relating to the property can be taken into account to reduce your tax bill. For a detailed list of expenses you can deduct and those you can't, see our related article and the notes to the land and property pages of the Self Assessment tax return.
What paperwork do you need to keep?
In order to be able to complete the land and property pages you need to keep:
- a note of all the rent you receive and the dates you rent out the property
- a record of your business expenses (see the Self Assessment land and property pages help notes for what counts as business expenses)
- sales receipts, invoices and bank statements
- all these records for six years after the tax year concerned
If you need help completing the pages, call the Self assessment helpline on 0845 9000 444 (open 8.00 am to 10.00 pm seven days per week)
More useful links
In this section...
- Expenses and allowances on income from property
- Record keeping for landlords
- Tax on buying property
- Tax on overseas property lettings
- Tax on rent from residential property lettings
- Tax on rental income - an overview
- Tax on selling property
- Tax relief when selling your home
- The Rent a Room scheme