New Tax Laws For UK Holiday Homes
The buy to let sector may have received little acknowledgement from the UK Budget Report last week for its importance to the UK’s economy, but coming tax legislation changes could soon spell bad times for property owners who currently use their holiday homes to offset their expenditures…
Whereas in the past property owners were able to take advantage of capital gains tax reliefs, capital allowances and offsetting losses through their furnished holiday homes. From the 6th April 2010, holiday homes will no longer be recognised as trading businesses but will now be recognised as a property investment business…
And already many property advisors are predicting that these coming tax changes will quickly dissuade new businesses from establishing themselves in this way. Unable to offset their capital expenditures against their other income, it will now take their holiday homes much longer to become a profitable asset…
Luckily reputable property portal holidaylettings.co.uk has announced some helpful investments tips that will enable property owners to deal more efficiently with these coming tax changes. According to reports they suggest incorporating the following procedure:
First property investors must deduct their allowable expenses from their rental income. These include: letting agent fees, council tax, maintenance and repair costs, utility bills, interest on mortgage payments, building and contents insurance, and additional running costs. By doing so they will be able to calculate their net profit.
Next, property owners can either deduct their wear and tear allowances (based on a % of the rent) or a renewals allowance (cost of replacing an old item) from this profit. By deducting these allowances, they will be able to calculate what taxable profit they have got available which can then be added to their overall taxable income.
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Tags: buy to let, property advisors, property investment, property investors, property let, property owners, property portal
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