Do You pay Capital Gains on a holiday let?

Providing all the first time homebuyer advice you need.

Helping you buy the house or holiday
home you really want.

Owning and letting a holiday home can be both pleasurable and profitable and in many cases it will give you good tax advantages if the property is let on a commercial basis. 

The property will need to be let out for at least 105 days during the tax year. These tax advantages were given to help kick start the UK holiday industry because many people were going abroad on low cost package holidays.

To qualify as a furnished holiday let, your property must be in the UK and let fully furnished with the intent of making a profit. Having a website or using an agent would help show that intent. 

Your property should be available to be let for 210 days a year and let for a total of 140 days. Lets of over 31 days and letting your home to friends and family for free do not count. 

If the total of all lettings that exceed 31 continuous days is more than 155 days during the year, this condition is not met so your property will not be an FHL for that year.

If you have a qualifying holiday let you will need to register for business rates and then you will pay no council tax. 

What about Capital Gains Tax (CGT) on the sale of a holiday let? 

Yes, it will be payable but if the business is registered as a FHL, furnished holiday let then you don’t have to pay the tax on the first £11,000 profit. The rate is then reduced to 10%. 

This is because an FHL owner can qualify for Entrepreneurs’ Relief (ER). This is very beneficial as it will allow you a reduction of capital gains tax payment from 28% to 10% on the first £10 million of gains. To qualify you must have owned the property for 12 months.

We strongly suggest that all persons interested in purchasing or who own a holiday let(s) should seek the advice of and work with a qualified professional such as an accountant. We are happy to refer you to such a person or business. 

Tax Advice On Capital Gains

Tax advice should be sought before selling a FHL, as there are likely to be Capital Gains Tax consequences.    

When a qualifying furnished holiday let is sold, Capital Gains Tax Rollover Relief could be available to defer the gain if you reinvest the proceeds in another qualifying asset.

Entrepreneurs Relief should also be available to reduce the rate of Capital Gains Tax to 10% on any chargeable gain. 

From 6 April 2020 new Capital Gains Tax reporting rules also came into force for the sale of UK residential property meaning the gain must be reported and tax paid within 30 days of completion of the sale, further information can be found here.  

Stamp Duty

Government tax payable when you complete your purchase. The amount payable is based on the purchase price. For the latest rates please see the HMRC website by clicking here.

Solicitors Fees
This amount will vary from case to case but for a single purchase typical legal fees including disbursements may be around £700 – £1000.
Stamp Duty

Government tax payable when you complete your purchase. The amount payable is based on the purchase price. For the latest rates please see the HMRC website by clicking here.

If you’re a first time homebuyer,
get in touch with us today!

We’ll give you a quality service that can make the whole process a lot smoother.

Helping you buy the holiday

home you really want.

Specialising in Mortgages for Holiday Homes

Talk to our experts for everything you need to know about buying your holiday home, holiday let or Air B&B

Your home may be repossessed if you do not keep up
repayments on your mortgage.

There will be a fee for the advice given, the exact amount will depend upon your circumstances but we estimate it we be £250.
Complex and sub-prime cases may attract a higher fee which will be typically no more than £395.

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