If you’re considering investing in a holiday home no doubt you’ll be doing so for a variety of reasons. Top of the list may well be so that you can enjoy a break in a lovely part of the UK, but have you also considered the financial advantages of owning a holiday home?
We’ve put together a few reasons and examples for you to consider:
To begin with a holiday home is a great long term investment. You can use the rental income to augment your pension when you retire. Alternatively you may have an eye on a short term investment in which case you’ll need to find a bargain from the offset.
Furnished holiday homes have several tax advantages over other types of home lettings. For example you can claim a ‘plant and machinery capital allowance’ on your furniture and furnishings in your holiday home. Any losses you make on letting your holiday home can be set against your total income and if your holiday home meets certain criteria you will be eligible to claim capital allowances, that can be deducted from your gross rental income, including letting agent fees, insurance, interest on any mortgage payments if applicable plus maintenance and repair costs, utility bills, council tax and marketing costs.
The criteria needed in order to qualify for these capital allowances are that the holiday home is fully furnished, and that it is available to be let for 210 days per year. Of those 210 days it must be let to the public (i.e. not to family) at a market rate for 105 days. You cannot let the property on individual short term lettings for longer than 31 days to one individual.
In addition to this, according to Gerry Jackson, of Oxfordshire accountants Critchleys: “If you satisfy the criteria to qualify as a furnished holiday lettings business … when you come to sell it, you may be eligible to pay Capital Gains Tax at the 10% rate for selling businesses, rather than the 18% or (more likely) 28% rate that normally applies to second properties.”
Look at the data
If you’re worried that you won’t be able to run a holiday home as a business consider the facts and figures. The latest VisitEngland figures, for example, have shown that there are 44.93 million holidays taken every year in the UK and that there are 34,386 non-serviced accommodation businesses (holiday homes, camping and caravan parks) that between them offer 1,360,894 bed spaces. This implies that the market for holiday homes is buoyant throughout the UK, and is reinforced by figures showing the growth in popularity of the humble ‘staycation’.
Find your location
And why not? The United Kingdom has some truly wonderful and diverse scenery and an amazing array of history and culture. There’s plenty to see and do – you like the food and you speak the language! VisitEngland has revealed that the most popular destinations are the South East, with 14% of all trips taken, and the South West with a whopping 19% of all trips taken by domestic visitors.
In addition to the financial benefits, you know that by taking ownership of a holiday home you will have a full range of benefits for your family. You’ll be staying in a safe environment that you can visit any time you wish. You’ll have your own space – somewhere to relax, unwind and de-stress, and you can return every year and invite your wider family. In many ways, you’re investing in a lifestyle change – something simpler and slower paced.
A few examples
Given the popularity of the South West as a holiday destination, investing in a holiday home in Dorset, Devon or Cornwall makes a lot of sense.
- If you do want to invest in a holiday home in Devon, you won’t do better than somewhere like Ladram Bay in East Devon. This unique family run park set in luscious East Devon countryside on the Jurassic Coast, has a superb array of amenities and activities available to suit the whole family – from the very young to the more mature.
- Other parks to check out include Hilton Woods Park in North Cornwall, with lodges set in gorgeous open countryside and close to Cornwall’s best beaches which is great investment, as are the Natural Retreats Residences at Trewhiddle, Cornwall with their beautiful beaches and rugged cliffs.
- Also worth a look are the lovely Mullacott Park lodges, located between Woolacombe and Ilfracombe in North Devon. These offer panoramic ocean and meadow views.
Of course purchasing a second home can be a daunting prospect so be sure to weigh up the advantages and disadvantages carefully and take advice where you need to. Happy holiday home hunting!