Considering a holiday let

[Testaburger]

I’m considering a holiday let in a little country village - I’ve spoken to some letting agents, so I have their rehearsed spiel, which (naturally) makes it all sound appealing.

I’m yet to sit with an accountant - I’d like a little more knowledge on the subject before I do so.

It’s for mixed use - I’ll use it a few weeks a year, and I’ll have it on the market for the rest. I think that it will qualify as FHL to HMRC. It sleeps 4.

I’m just trying to work out what it’s going to cost me. Aside the agents fees, and income tax (it’ll be my only source of income declared to HMRC), I’m trying to work out roughly what my business rates would be.

If, before fees, I were to generate 16k a year (the property I’m looking at supposedly has an annual estimate from the agents of 17-19k), how is this figure used to derive business rates?

In future years, will I be showing HMRC my accounts so they can calculate new rates, or is it a value based on prior metrics, a la council tax?

Also, is there some variation in that, due to I may be using it myself for perhaps 6-8 Weeks a year?

Thanks for your help. I’m just weighing it up to see if it’s worth it. I’m comfortable with the purchase costs, and allowable expenses. I’m also assuming that depending on the business rates, the taxable income after my costs would likely be brought down to almost zero tax liability.

I’m just wondering what my business rates will be, and how both personal and business use combine when it comes it rates and council tax.

Edited by Testaburger on Saturday 23 June 01:58

[GT03ROB]

Have a holiday let on the edge of the New Forest. Not used by us at all so totally for the letting market.

We get small business relief & pay zero business rates.

You will struggle to make 16k from 18-19k rental unless you really cut corners.

You will need to allow for:
- depreciation on soft & hard furnishings, white goods
- general building maintenance (anything that crops up needs fixing now, not when your tradesman gets time, so premium prices)
- gas / elec / water (don't underestimate what you will go through particularly if occupied during winter)
- cleaning / laundry / gardening
- advertising/booking agents fees if you use them
- broadband & Wi-Fi
- welcome packs

You will struggle to do all that for 3k a year.

Edited by GT03ROB on Saturday 23 June 03:24

Edited by GT03ROB on Saturday 23 June 03:25

[Testaburger]

GT03ROB said:

Have a holiday let on the edge of the New Forest. Not used by us at all so totally for the letting market.

We get small business relief & pay zero business rates.

You will struggle to make 16k from 18-19k rental unless you really cut corners.

You will need to allow for:
- depreciation on soft & hard furnishings, white goods
- general building maintenance (anything that crops up needs fixing now, not when your tradesman gets time, so premium prices)
- gas / elec / water (don't underestimate what you will go through particularly if occupied during winter)
- cleaning / laundry / gardening
- advertising/booking agents fees if you use them
- broadband & Wi-Fi
- welcome packs

You will struggle to do all that for 3k a year.

Edited by GT03ROB on Saturday 23 June 03:24

Edited by GT03ROB on Saturday 23 June 03:25

I perhaps wasn’t clear. The figures I’ve been quoted are estimated gross figures.

I’m comfortable/au-fait with the running costs. I’m just trying to understand how business rates work, and estimate my liability there, and also work out if it must be divided between commercial and private use.

FWIW, it will be in Richmondshire district council.

From what I can gather, business rate relief disappears on a ‘rateable value’ of 15,000. I’m trying to ascertain what that ‘rateable value’ is.

[anonymous-user]

Our sister company is a holiday letting business, so a few observations.

The market (at least in our area) seems to be slowing a bit bit. This seems to be a combination of general economic fragility, and the fact that while asking prices have been rising, availability has been increasing due to lots of people piling into the market in the last 5 years.

Secondly, the running costs are usually much higher than people expect, particularly costs for cleaning/laundry and day to day repairs. The thing about holiday lets is that to justify the costs, they have to look and feel like they are worth the cost.

We're definitely seeing a trend of some holiday let owners switching back to residential lets, as holiday lets are either too much work, not as profitable as they'd expected, or just too unpredictable in terms of income.

I think it depends on what you are trying to achieve. If the main aim is to have somewhere for you to use, and the letting is just a way to pay the bills, then maybe it's still worth it. But as a money making opportunity, it's definitely not as easy as some people seem to think it is.