Despite the added stamp duty on second homes, investment in a second property in and around Chichester is still a popular way of generating extra income
The Chichester Area is renowned for its many places of cultural interest as well as outstanding natural beauty. There are thriving businesses and a university. Therefore, Chichester and its surroundings are a popular place for holiday makers as well as people needing to rent a permanent home.
As our summer weather becomes hotter and with new concerns about holidays abroad, potential Chichester investors may be asking themselves whether they should be looking for a Furnished Holiday Let or a property more suited to a permanent rented residence.
The practical considerations are obvious as a property rented all year round to long term tenants means very little effort for the landlord, especially if they use a Chichester letting agent to collect the rent and organise repairs and the legally required checks. Furnished holiday lets require a lot more management due to the high turnover and the extra requirements of a short term let.
However the tax considerations are more favourable to owners of a Furnished Holiday let business.
Property Rented for permanent occupation
- Capital Allowances are not available in respect of furniture and household equipment provided for use in a furnished residential property. Therefore items purchased for the first time in order to prepare the property for letting are not allowable.
- However there is a relief which covers the replacement of domestic items which would occur when they wear out after a period of letting.
- There may be relief under ITTOIA05/S57 covering pre-letting expenses and advice would need to be sought on an individual basis.
- Profits on normal letting activities are not regarded as earnings for pension purposes.
- Capital Gains relief such as rollover relief, gift relief and entrepreneur’s relief cannot be applied in respect of the sale or transfer of a normal rental property.
Furnished Holiday Lets (FHL’s)
- A property must satisfy certain conditions to qualify as a Furnished Holiday Let.
- Profits from a Furnished Holiday Let may be treated as ‘earned income’ and therefore increases the amount the landlord can pay into a pension.
- FHL’s do qualify for capital gains reliefs that normal lettings do not such as rollover relief, gift relief and entrepreneur’s relief.
- Capital Allowances are available on the furniture, furnishings and equipment in the property. Therefore expenditure incurred in preparing the property for letting can be offset against profits.
I hope this guide will provide some help and inspiration for potential landlords in and around Chichester. For further information or to chat through your concerns please do not hesitate to contact Monica on 07707568549 or monica@thefishbourneaccountant.com
This blog is intended to be a brief guide and is not intended as detailed technical information to be relied upon for an individual situation. Tax rules on property can be complicated and expert advice should be sought for each individual case.
