As landlords find it increasingly difficult to make a profit from buy-to-let thanks to various tax and regulatory changes, as well as higher mortgage rates, many are turning to short-term holiday lets and Airbnbs in order to boost their income. According to research from estate agency Hamptons, 2,426 holiday let companies were set up last year, compared with 592 in 2016.
This has become such a phenomenon that even Michael Gove, the housing minister, is threatening to get involved, seeking to introduce proposals to force homeowners to seek planning permission before renting out their properties as holiday lets. In some parts of the country, such as London, this is already a requirement for those letting their home to holidaymakers for more than 90 days a year.
As well as potentially higher income from shorter lets, landlords are also being tempted by the tax breaks as a holiday let owner is treated like a business, enabling landlords to offset expenses against their tax bill, including mortgage payments and buying furniture. In England, if your property is let for at least 70 nights a year and available for at least double that, you can also switch from council tax to business rates. If the latter’s annual bill is less than £12,000 and you rent out only one property, there is no tax to pay.
If you currently have a buy-to-let mortgage on your property and are thinking of switching it to a holiday let, you will need to inform your lender. Lenders’ rules vary – some will let you rent out your property for up to say 30 days at a time and a maximum number of days a year, some will let you rent out a couple of rooms with no extra charge but increase the rate paid if you rent out the entire property. Not all lenders offer holiday let mortgages, although the number is growing, so you may need to remortgage to another provider.
You must also inform your home insurer of your plans to rent out the property on a short-term basis or you may find that any claim you make is rejected. Specialist insurance is available.
If you are interested in finding out more about a holiday let mortgage, get in touch. AWS Private Finance is a whole-of-market broker who will look for the best mortgage for your circumstances, comparing all the products on the market. Please get in touch for more information.
