How Turning Your Buy-To-Let Into A Holiday Let Will Transform Your Income

Amid the deteriorating economic sentiment, landlords are grappling with escalating interest rates and costs. As the gap widens between mortgage payments and achievable rent, there's growing apprehension that the buy-to-let market may see a significant decline. This is further compounded by the UK's forthcoming rent reforms, which aim to grant greater control to tenants, thereby intensifying the challenges faced by buy-to-let landlords.

Imagine a property strategy that not only provides robust cash flow but also offers substantial tax advantages that a buy-to-let can't match. A strategy where you retain full control of your property without the common challenges posed by tenants. Does this sound intriguing? Please allow us to introduce you to serviced accommodation, also known traditionally as Furnished Holiday Lets (FHL).

We’re diving into why turning your buy-to-let property into a holiday let can help to sweat your asset, totally transforming your income. But firstly, what is a holiday let and how does it differ from your typical buy-to-let?

Serviced accommodation, commonly known as holiday lets, offers properties for rent on a nightly basis, complete with additional services like cleaning, laundry, and consumables. Think of it as a hotel experience, but instead of just renting a room, guests have access to the entire property. This short-term let model is versatile, catering to various markets – from leisure travellers and business professionals, to individuals needing temporary housing for insurance relocations or extended stays. By tapping into these diverse markets, property investors can amplify their property's cash flow potential and optimise occupancy. The result? Significantly greater returns than what's typically expected from a standard buy-to-let property.

Why Transform Your Property into a High-Return Holiday Let?

The Surge in Staycations

The Coronavirus pandemic in 2020 catalysed a surge in staycations. An increasing number of Brits are now exploring the hidden gems within the UK. Consequently, the demand for short term rental accommodation has skyrocketed, making now a prime time for property owners to pivot from traditional buy-to-let options to holiday accommodation.

Boosted Income and ROI

The burgeoning demand for serviced, short-term rental accommodation means higher profits for landlords. These holiday lets can often command impressive rental yields — during peak seasons, some landlords might earn in a week what a buy-to-let property yields in a month. This is largely because holiday lets can fetch premium nightly rates compared to the monthly rentals of traditional properties. In our area of Bournemouth and Poole, typically you can see a 2-bed apartment in peak season obtain more than £250 per night. 

Even during off-peak months, these properties can cater to other niches, like corporate travellers. While the returns might be somewhat lower outside of holiday season, the income remains robust.

Tax becomes exciting

Unknown to many are the significant tax benefits that a Furnished Holiday Let can bring!

Capital Allowances:
The opportunity to pay far less tax on your profits. You could claim back, on average, a tax saving of £35k or more. The icing on the cake, a claim can be made and rubber stamped by HMRC in a matter of weeks.

Article 24 Relief:
There is the potential to offset 100% of your mortgage interest.

Small Business Rate Relief:
There is the possibility to pay no business rates or council tax on your property for the duration of it being a FHL.

Capital Improvements:
You can claim tax relief on any purchases you make to furnish your SA property, even down to the crockery and cutlery you provide.

Capital Gains Tax:
Enjoy next to zero capital gains tax (CGT). In the right circumstances and with the right set up, it is possible to sell a Furnished Holiday Let, make a capital gain and not pay any tax.

Pension Tax Relief:
You’ll have full tax relief on pension contributions (for the equivalent value of profits made on your holiday let/serviced accommodation up to £40K/yr.).

Disclaimer: We are not qualified tax advisors and it is essential that you seek your own professional advice.
We work closely with tax specialists who can advise you of the best set up, to maximise on these tax benefits. We will happily put you in touch.

Reclaim Your Time & Boost Your Earnings: We’ve Got You Covered

Considering the switch from a buy-to-let to a holiday let? The transition is seamless when guided by specialists. As seasoned professionals in holiday let management, our dedicated team is poised to handle the intricacies for you, ensuring you make decisions with clarity and confidence.

From managing bookings and guest communications, to overseeing maintenance and repairs, we've got every detail covered.

Our commitment is twofold: first, to free up your time so you can prioritise what truly matters to you. Second, while we might not be the largest, our ambition is clear — to be recognised as the most trusted management company on the South Coast.