The Isle of Wight is in the Google Top 10!
The Covid 19 pandemic has certainly caused many people to consider buying a second home in the UK, and as we know, pretty much everyone has dreamed at some point of having a house by the sea.
Recent analysis by Martin & Co of Google search data, has revealed that Google searches for holiday homes across the UK have increased by 141% in the past year. It’s no surprise to see the Isle of Wight in the most searched for holiday home destinations across the UK, firmly in the top 10 at position number 8 of the top locations. It’s right up there with Cornwall, Devon, The Lake District and other favourites.
Unsurprisingly, coastal destinations dominate the top ten as people crave an escape to the seaside to make the most of the great outdoors and beautiful British beaches. Many people have visited the Island as a child on a family holiday, on a school trip or have been regular visitors down the years. It makes a great place to have a second home. The ferry trip really adds to the feeling of ‘getting away”.
Does it make financial sense to buy a second home?
Renting out your holiday home can make great financial sense, with tax advantages not available to a landlord offering their property for normal residential letting. If your holiday home meets certain criteria, there are favourable tax benefits which will make your investment more profitable.
How does this work? A 'furnished holiday let' is a type of rental property classification that allows you to take advantage of favourable tax rates if you let out a holiday home for at least 105 days a year. The furnished holiday let tax was created to encourage investment and rejuvenation in Britain’s holiday destinations.
It applies to properties in the UK and your property must be fully furnished.
Your property must be commercially let - i.e. you intend to make a profit! You don’t actually need to make a profit btw - just show that is your intention. We can help you develop a business plan to do just that.
Your property must be available to let for a set number of days per year, being available to tourists and holidaymakers:
- It must be available to let for at least 210 days of the year (30 weeks)
- Be rented out on a commercial basis for at least 105 days a year (15 weeks)
You can’t count longer-term lets of more than 31 days and any days when you let the property to friends or relatives at no cost or reduced rates, as this is not a commercial let.
These are significant!
- Deductible holiday let expenses - owners can be entitled to deduct holiday home expenses and allowances from their rental profits on items used to increase the potential rental income of their holiday let. This includes items such as furniture, equipment and fixtures, including for instance installing a new kitchen. If you fancy decking out your holiday home to a luxury standard, then you can deduct this cost from your pre-tax profits. You provide a luxury holiday home standard for holidaymakers to maximise your rental potential - and make extra profit for you. Any losses can usually be carried forward to the next tax year.
- Accounting Fees - you are entitled to tax relief on accountant fees that have been paid towards the preparation of your holiday home business accounts;
- Advertising – the costs of advertising your property and using Wight Holiday Lettings can be claimed back as tax relief;
- Insurance - since you have insured the property, you will be able to claim this back against tax;
- Heating and Lighting - any gas or electricity relating to the holiday let can be claimed back against tax. (A word of caution - do not try to claim gas, electricity or fuel that has not been used exclusively by holidaymakers and tourists);
- General Repairs - nearly all general repair costs can be claimed back against tax. Think about painting and decorating costs too;
- Cleaning and Gardening - if you hire a cleaner or gardener to care for your property, you can claim the cost back against tax. If you stock with plants or build a play area, you can claim this cost too;
- General costs - cutlery, bed linen, towels etc. These are the items your guests will expect to be cleaned and/or replaced.
- Interest relief – interest payments on a mortgage taken to buy the holiday property can be deducted from profits. This is a business, and interest is an allowable expense. If you’re buying with a mortgage and already have one on your main home, bear in mind that your lender will want to know why you’re buying a second property. You may also need to have at least 25% of the property’s purchase price as a deposit if you already own another property. Your lender will need to be certain you can afford both mortgages.
- Capital Gains Tax relief – there are certain benefits that can be available to holiday home owners, including Business Asset Rollover Relief which delays CGT if you sell or use all or part of your proceeds to buy a new holiday home, Entrepreneurs Relief and Gift Hold-Over Relief.
- Split your tax - If you share the ownership of your Furnished Holiday Let with your partner, you can portion the profit however you decide for tax purposes, regardless of the ownership split.
- Avoid Council tax - if you qualify as a furnished holiday let for tax purposes, then you need to register for business rates. The IOW Council will calculate business rates and these could well be cheaper than council tax as you may be able to claim Small Business Rate Relief, which will reduce the amount of council tax you will have to pay. In England, you are eligible for Small Business Rate Relief if your property’s rateable value is less than £15,000.
In this post-covid economy, with foreign travel becoming less of an attractive option for many, the demand for holiday rental properties in the UK has been unprecedented. We are seeing a huge increase in the number of bookings outside of the peak season due to several factors, including the cancellation of foreign holidays.
Whilst the property market is buoyant, there are plenty of ideal properties for sale that would make a perfect holiday letting investment.
We’re currently seeing a flurry of activity in the buy-to-holiday let market and have been advising a great deal of potential investors and new owners in recent months. We are happy to share our years of expertise in these areas with any clients considering buying on the Isle of Wight, whether as a holiday let investment, or perhaps a personal 2nd home that may one day become something that earns you a nice income.
If you’re thinking of buying on the island and need some help finding the right place, town or style of property for a holiday home, please give us a call on 01983 525710 or email us at email@example.com