European Law is now dictating that the UK tax rules for UK holiday lets needs to be brought into line.

This is bad news for those with a UK holiday let.

The UK has for many years had generous tax rules regarding UK holiday homes.

If you taxes allowable costs of running the property (eg maintenance, letting fees, mortgage interest costs, cleaning etc) are in excess of the income, it is currently possible to offset the loss against earned income. For example, if your income from letting the property was £10K, but costs were £15K you would be able to get tax relief for the £5K against tax already paid on your earned income. For a higher rate tax payer that would mean a refund of £5K @ 40% i.e. £2K.

If you made a profit on selling there were also generous reliefs available to reduce the capital gains tax bill, via taper relief. However, European Law has deemed this unfair and both reliefs will be withdrawn at the end of the current tax year 2009/2010.

So this is bad news for anyone with a UK holiday let.

However, it also means that if you have an overseas holiday let there is a window of opportunity until 5^th April 2010 to take advantage of the rules that have been in place for a UK holiday let.

If you have made an operating loss with your expenses in excess of income, and if you have sold at a profit and paid capital gains tax you are able to review your tax calculations. A significant refund may be due to you.

I am happy to recommend a tax adviser if you need help.

This entry was posted on Wednesday, May 13th, 2009 at 12:04 pm and is filed under property market general. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.