Hot topic – holiday lets

One of the enduring legacies of Covid could well turn out to be the rise of the stay-cation, with coastal destinations such as Cornwall, Devon and Dorset, and established tourist hotspots such as the Lake District, reporting an influx of holidaymakers. With overseas travel restrictions and outright bans likely to be in place for some time as a result of the pandemic, more people are enquiring about buying a holiday home in the UK. Not only does a holiday let enable you to vacation at home, it also enables you to potentially recoup some of the costs by renting it out for part of the year – and if this demand for stay-cations does continue, that could provide a tidy income.

Holiday let mortgages have been available for some time although only from a limited number of lenders. However, that situation is changing with lenders sensing an opportunity – a number have recently launched holiday let mortgages or returned to the market in response to buyer demand. With buyers of second homes able to benefit from the stamp duty holiday – saving up to £15,000 if they complete on their purchase before 31 March – this is likely to boost demand further still.

With the growth of limited company landlords, there are now also holiday let mortgages for those buying via a company rather than in their own name. Rates on holiday let mortgages tend to be slightly higher than standard residential deals as there is less choice available and you will need at least a 25 per cent deposit – more for the best rates. Rates are available from less than 3 per cent for a two-year fix for those with a 40 per cent deposit.

While a holiday let may appeal, investors need to do their research carefully and consider the costs and hassle involved with owning a holiday property, as well as likely rental demand. While there are stamp duty savings to be made, the 3 per cent additional stamp duty surcharge on the entire purchase price still applies. However, holiday let owners can take advantage of tax breaks which are not available to buy-to-let landlords, such as deducting all the interest they pay on their mortgage from the rental income they declare to HMRC. Holiday let owners can also subtract expenses and take into account some, if not all, of the value of furniture and essential fixtures and fittings. To do this, the taxman must classify the property as a Furnished Holiday Let and it must be available to holidaymakers for at least 210 days of the year, with lettings agreed for at least half of those.

Whether you are interested in buying your first holiday home on the coast, in a big city or other tourist hotspot, or are an experienced investor wanting to expand or remortgage a portfolio, please get in touch for more information.

Top 10 UK holiday home locations

1. Wales 2. Cornwall 3. Scotland 4. Devon 5. North Yorkshire 6. Norfolk 7. The Highlands 8. Cumbria 9. Dorset 10. Northumberland
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