Take a tax break with a holiday home

As the recession bites, one in four owners is going down this route, according to holidaylettings.co.uk, which features 28,000 properties worldwide on its website.

With trips abroad now more expensive because of the weak pound, demand for UK holiday accommodation is growing. Enquiries about British properties have overtaken interest in France and Spain.

January is the peak of the holiday-booking season. Typically, owners let their property for between 18 and 25 weeks a year, and make £8,000 a year, on average.

Juicy tax breaks are available to owners of furnished holiday accommodation who meet certain lettings rules. Basically, the property is treated as a business for tax purposes, rather than an investment, as is the case with conventional buy-to-let income.

To qualify property must be let or available to let for at least 140 days and actually let for at least 70 days. No single let can be for more than 31 days. Rents must be “commercial”, and friends and family cannot be tenants.

Having met these requirements, business expenditure in relation to the property is tax-deductible, and so is mortgage interest. Losses can be carried forward against future profits, while capital gains tax on resale can be avoided altogether if the proceeds are reinvested in another holiday home.