Tax and rule changes holiday home owners need to know

1. Rental platforms will share users’ information with HMRC from January 2024
2. Planning permission required for a property to be used as a short-term let
3. New mandatory national register for short-term lets
4. New business rates rules for holiday lets
5. Plans to charge VAT on holiday rental accommodation in the EU

Automatic and global sharing of information with HMRC

Rental platforms in the UK, such as Airbnb, already share information with HMRC.

From 1st January 2024 HMRC’s reach will be automatic and global. New regulations give HMRC greater power to investigate tax affairs of individuals using overseas platforms. This includes rental platforms such as overseas holiday letting sites, food delivery apps, freelance websites and others.

The changes could impact five million businesses and holiday homeowners.

Overseas rental platforms will have to submit their first information to HMRC by January 2025.

Planning permission required for short-term holiday lets

The Government has given councils greater power to control short-term lets by making them subject to the planning process. Property owners will be required to get planning permission for existing homes in England to be used as new short term lets. Existing short-term lets will automatically be reclassified and won’t require a planning application.

These planning changes will not apply to hotels, hostels or B&Bs.

The proposed rules will apply to holiday lets and include properties let via online platforms such as Airbnb, in certain locations.

The Government is concerned that the increase in the number of short-term lets in certain areas, such as coastal towns, cities and national parks, can reduce the availability and affordability of homes for local people.

The changes will be introduced later this year.

National register of short-term lets

A new mandatory national register will be held to give councils information they need about short-term lets in their area. This will help to track the effects on their communities and support compliance with key health and safety regulations.

Changes in business rates from April 2023

From April 2023, stricter rules apply in England and Wales when determining if a holiday let is subject to business rates. The changes from April 2023 mean second homeowners must pay if they are not genuine holiday lets.

Rules from 1st April 2023

Properties are self-catering and subject to business rates where it's:

England

• available to let for short periods for at least 140 nights in total over the current and previous tax years
• actually let for at least 70 nights in the last 12 months

Wales

• available to let for short periods for at least 252 nights in total over the current and previous tax years
• actually let for at least 182 nights in the last 12 months

Different rules apply in Scotland and Northern Ireland.

EU plans to charge VAT on holiday rental accommodation

The EU plans to change the VAT rules in relation to holiday accommodation. The rules impact landlords:

• based both in and out of the EU
• letting property in the EU
• using digital platforms, such as Airbnb

From 2025 the new rules will mean these landlords see VAT charges passed on. The platform operators who will deduct VAT from landlords' gross rental receipts.

The EU believes that most holiday accommodation supplied through third parties is not registered for VAT. This is because the individual property businesses fall below the relevant VAT thresholds. Digital platforms, like Airbnb, compete directly with the hotel sector. The EU believes this means the traditional hotel sector is at a disadvantage and they wish to level the playing field.

The EU plans will create a consistent tax environment and ensure similar VAT charges apply to consumers booking holiday accommodation online.

The UK has not yet introduced these rules. It is likely the UK will look closely at this development and may decide to adopt similar measures.

Furnished Holiday Lets

A furnished holiday let may be more tax efficient than a buy to let property. If your holiday accommodation meets the qualifying criteria, there are several tax advantages.

How TaxAssist Accountants can help

We are available to help you understand if your property qualifies as an Furnished Holiday Let and to help you understand your tax position in relation to this. So, get in touch for a free, no obligation meeting. Call us today on 01233 771926 or complete our online form to make that first step.

Date published 12 May 2023 | Last updated 26 Feb 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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