Renting out a property as a holiday let can be a lucrative source of income, whether it’s a cosy cottage in the UK or a sunny villa abroad. However, it also brings a set of tax obligations that every property owner should be aware of. At Lucas Prestige Accountants, we work with landlords and property investors to ensure their holiday rental income is reported correctly, tax-efficiently, and in full compliance with UK regulations.
Holiday Lets in the UK – Furnished Holiday Lettings (FHL)
If you rent out a furnished property in the UK as a short-term holiday let, it may qualify for the Furnished Holiday Lettings (FHL) tax status. This offers some attractive benefits, but only if certain conditions are met.
To qualify as an FHL, your property must:
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Be fully furnished and available to let for at least 210 days per tax year
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Be actually let as holiday accommodation for at least 105 days per year
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Be let on a short-term basis (no one tenant staying longer than 31 days in a row)
Tax advantages of FHL status include:
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Ability to claim capital allowances on furniture and fittings
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Profits count as relevant UK earnings for pension contributions
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Potential reliefs for Capital Gains Tax (CGT), such as Business Asset Disposal Relief
If your property doesn’t meet these conditions, it will be treated as a standard rental property and taxed accordingly, which may offer fewer reliefs.
Overseas Holiday Lettings
Owning a holiday rental abroad does not exempt you from UK tax obligations if you are a UK resident. Even if you pay tax in the country where the property is located, you are required to declare the income to HMRC.
Key considerations include:
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You must report foreign rental income on your Self Assessment tax return
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Double taxation agreements between the UK and other countries may allow you to offset foreign tax paid
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You can deduct allowable expenses, such as property management fees, insurance, and maintenance costs
It’s essential to keep detailed records of both income and expenses, and where applicable, convert currency values accurately for UK reporting.
What You Can Claim
For both UK and overseas holiday lets, allowable expenses may include:
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Letting agent or platform fees (e.g., Airbnb service fees)
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Cleaning and maintenance costs
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Utilities and insurance
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Council tax or local equivalents
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Mortgage interest (restrictions may apply)
Accurate record-keeping and correct expense classification are crucial to minimise your tax liability.
How Lucas Prestige Accountants Can Help
Whether you are a first-time holiday let owner or have a portfolio of short-term rentals, our experienced team can:
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Help you determine if your property qualifies for FHL treatment
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Prepare and submit your Self Assessment return correctly
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Advise on allowable expenses and tax reliefs
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Guide you through double taxation rules for overseas properties
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Provide proactive advice on tax-efficient structuring
Holiday lets can be an excellent investment, but without the right advice, you may face unexpected tax bills or miss out on valuable reliefs.
Contact Lucas Prestige Accountants today to ensure your holiday rental income is fully compliant and tax-efficient – in the UK or abroad.