Financial

Following several years of substantial increase in the price of cottages (unfortunately not matched by rents) financial returns are very low. However, most purchasers have other reasons for buying and a longer-term view.

There are financial advantages (apart from ‘free holidays’!) as outlined below.

Commission is charged on rent (plus any pet income) at 15% plus VAT on School Holiday weeks (excluding February half term) and 20% plus VAT on the remainder. This difference reflects the high demand and high rents for the school holidays and the greater difficulty/lower rates (including Short Breaks) for the remainder.

We pay all monies earned less commission on your property within seven working days of the end of the month, directly into your nominated account. (Many agents hold onto your money for much longer.)

A Joining and small Annual Renewal Fee are payable.

If paying us a monthly housekeeping fee, this and any cleaning, laundry and repair bills arranged through the office will be deducted.

The Inland Revenue regards holiday letting as a business. Capital Gain on disposal is therefore subject to taper relief- thus reducing it to 10% after two years. In order for the Revenue to accept deduction of expenses from the rent, the property must be available as a commercial rental for at least 140 days (20 weeks) and let for 70 days (10 weeks) during the year. You can usually deduct from the rent received, repairs/renewals of fixtures, fittings and the fabric of the property together with all cleaning and laundry, rates, insurance, electricity/gas/oil/logs, TV license, gardening, mortgage interest. Losses can be carried forward. Profits are regarded as earned income (it may be advisable for the property to be in the name of the lower income earner). Council Tax arrangements/discounts have been reviewed and it may be worth opting for a Business Rate Valuation which removes any restrictions on letting.

VAT: Holiday rental is a ‘taxable supply’ and may be liable to VAT; approx 15% of the rental may be lost unless the letting is done by an individual or partnership that is not registered for VAT and continues to have a total turnover below the VAT registration limit (currently approx £60k).

Insurance: The only additional requirement is for £2 million of Public Liability cover. A local broker very familiar with holiday letting properties is David Upshall, Dorchester, 01305 268883