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Will my holiday home get hit by the new buy-to-let tax?


10-07-2015

 

Ask an expert: From 2017 new taxes apply to mortgaged buy-to-let investors. What about holiday homes? 

Villas on the Ionian Islands

Villas on the Ionian Islands

If you're resident in Britain for tax purposes, your overseas property investments will be taxed in the same way as your British ones Photo: Rob Jewell

By  Richard Dyson

I've read a lot in your pages about the new tax on property investments. I have a mortgaged villa in Greece that I let. Will I be hit by the buy-to-let changes?

FG via email


As it stands now, buy-to-let investors can deduct the full cost of their mortgage interest from their rental income before paying tax.


The same applies to holiday lets. If you are a British taxpayer, it doesn't matter where your villa is - you will pay tax here in the same way. If you use your villa, you need to allow for this when you deduct your expenses.


The ability to deduct mortgage interest costs will be phased out in future years for straightforward buy-to-let, leading to higher tax bills for mortgaged owners.


You can read about how this will impact borrowers here, where example calculations are included.

But this change won't apply to properties qualifying as "furnished holiday lettings".

This is because it seems that the taxman will view the former as a "business" while traditional buy-to-let, where tenancies are longer, apparently fall into another category.

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Your property will need to meet certain conditions to be classed as a "furnished holiday let".

St Just in Roseland: This beautiful Grade II listed cottage has two bedrooms and 400 yards of river frontage in south Cornwall's most salubrious location

St Just in Roseland: This beautiful Grade II listed cottage has two bedrooms and 400 yards of river frontage in south Cornwall's most salubrious location


Your ability to deduct costs from holiday home rental income will be reduced if you use the property yourself

These relate, for example, to the availability of your property, the length of rentals offered, and other services you might provide such as welcome packs, regular cleaning and so on.

– Do you have a question to put to our experts? Email moneyexpert@telegraph.co.uk

www.telegraph.co.uk

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