Generous tax perks for holiday homeowners that had been earmarked for abolition by Labour before the general election have been reinstated by Chancellor George Osborne.
The move will boost the UK’s burgeoning “staycation” trend and give a fillip to holiday home hotspots around the country, as more people are encouraged to invest in property for pensions.
More than 120,000 self-catering holiday businesses will benefit as well as hundreds of individual owners of holiday lets. Tax experts say the benefits can be worth up to £4,000 a year, plus capital gains tax on resale profits can be avoided by investing the proceeds into another property.
To qualify, properties must be available to let for 140 days a year
and actually rented for at least 70 days during the same period. Lets of more than 31 days to the same person do not count. Owners can offset the costs of running and maintaining the letting against income. This cuts their taxable income by taking costs from pre-tax salary and earnings.
Mr Osborne has even extended the rules to include properties in Europe. But there will be a review of the lettings rules and a new regime could come into force from April next year. HMRC believes some people may be abusing the system by letting out pads to friends and getting relief on the mortgage.