When embarking on your holiday-letting journey, knowing how to manage bookings, cleaning, maintenance, and changeovers is an integral part...
Use the quick links below to find out about a particular topic, or continue reading our holiday let Stamp Duty Guide.
Stamp Duty or Stamp Duty Land Tax (SDLT) is a cost a buyer must pay when purchasing a residential property, or a piece of land in England and Northern Ireland, worth more than £250,000.
The charge works on a tiered basis and is only applicable after the minimum threshold price is reached, which increases in relation to the value of the property thereafter.
Information sourced from HMRC website
The rules and regulations are updated periodically, so it is advisable to make sure you are aware of the impact it will have on your purchase price. Find out further information from HMRC on stamp duty.
Click below to calculate your Stamp Duty Land Tax (SDLT):
When you buy any property, you will be required to pay Stamp Duty. If the property is in addition to your main residence that is not replacing your main residence, be it a second home, a furnished holiday let or a buy-to-let, you will have to pay the higher Stamp Duty Land Tax rates.
You will be required to pay the higher rate of Stamp Duty if the following applies to your situation:
These stamp duty land tax rates start at 3% and then rises in bands, climbing to 15% for the most expensive properties.
Information sourced from HMRC website
Here is an example of how to work out Stamp Duty on your holiday let:
If you purchase a house that is in addition to your main residence for £300,000, the higher rates SDLT you owe on the purchase will be calculated as follows:
Click below to calculate your higher rate Stamp Duty
Visit HRMC’s guidance on higher rates of Stamp Duty Land Tax for more information on the topic.
There are occasions where the higher rate Stamp Duty no longer apply. These include:
If you sell your previous main residence within 3 years you may be eligible for a refund of Stamp Duty higher rate charge. You must apply for any repayment within 12 months of selling your previous main residence.
You can apply for a repayment of the higher rates of SDLT as long as you are the main buyer of the property or the agent acting for them.
Apply for a repayment of the higher rates of Stamp Duty Land Tax via the HMRC’ online form.
There are certain transactions that may qualify for a ‘relief’ that reduces the amount of higher rate SDLT you have to pay. These often come with specific conditions and criteria that need to be met in order to qualify. These include the following:
It’s important to carefully review the official guidance from HM Revenue & Customs (HMRC) or consult with a tax professional to determine your eligibility for any of these reliefs and to understand how they might apply in your situation. Read the HMRC’s guidance on Stamp duty land tax relief for more detailed information.
Providing your finished holiday let meets the required criteria, there are a few favourable tax benefits which cold help offset the cost of higher rates on holiday let Stamp Duty.
Short-term holiday lets tend to yield higher profits compared to other property rentals. The weekly rate charged for holiday lets are significantly higher, which increases your income potential and can help offset the additional cost over time.
There are certain allowable expenses and running costs which are associated with running a holiday let business. Some of these can be deducted from your pre-tax income and provide additional way to recuperate the higher rate of holiday let Stamp Duty. Read our blog which covers in detail the costs of run a holiday let.
When the time comes to sell your property, providing you sell at a profit, you may have Capital Gains tax to pay. Fortunately, if you meet the conditions to be a Furnished Holiday Let, there are a few different Capital Gains tax relief options available.
You may be able to pay less Capital Gains Tax when you sell your Furnished Holiday Let if you qualify for Business Asset Disposal Relief. This means that when you sell your property, the tax rate will only be 10%. Business Asset Rollover and Gift Holdover Relief are other possible avenues to receive respite from taxation.
Read our comprehensive guide to Furnished Holiday Let tax for a detailed look at the other tax advantages you could use to offset this additional expense.
At Coast & Country Cottages, we pride ourselves on the outstanding local service we offer, delivering exceptional results with high levels of booking and income for our owners. We can provide support and advice on every aspect of making your investment a success, from planning and development to income forecasts and interior design.
We’ve put together a selection of blogs to help answer your queries and take the hassle out of holiday letting:
If you would like to find out more about letting your holiday home, call our experienced team on 01548 843773 (option 2) or visit our Let Your Cottage page to request a free Owners Guide today.
At the time of publishing (25/08/23), Coast & Country Cottages has taken all reasonable care to ensure that the information contained in this article is accurate. However, no warranty or representation is given that the information is complete or free from errors or inaccuracies. Generic information is contained within this article and each individual’s financial affairs are different, further advice should be sought from a financial advisor.