Tax bombshell for UK holiday home owners

A tax on holiday homes will penalise owners and damage the UK tourist trade
Kirstie Allsopp
© Channel 4
Meadowgate, owned by TV presenter Kirstie Allsopp, on the Devon and Cornwall borders, is rented to holidaymakers for between £2,000 and £2,500 a week
While MPs’ have been busy claiming expenses for their second home, the voting public who own UK properties let to holidaymakers face losing favourable tax breaks that have existed since 1983.

Proposals to end the tax concessions, worth £20 million a year, were buried in the small print of last April’s Budget and are now coming to light. The move has been condemned by the Country Land and Business Association as a “hidden attack” on British tourism. Lettings agents say thousands of owners will be worse off and that the supply of holiday properties will shrink.

Under current rules, furnished holiday accommodation available for letting for 140 days a year and actually let for 70 days a year is treated by Revenue and Customs as a “business asset”. Owners can offset expenses incurred in running the property, including mortgage interest payments, against their personal income. Owners can also claim tax relief against capital gains.

However, from April 2010 these tax privileges will be abolished because the Government says they are incompatible with European law.

“It’s a big blow to many owners, particularly those with large mortgages who bought recently,” according to Kate Stinchcombe, of website

‘It’s an ill-conceived idea that will have a negative long-term impact on the tourism industry’

Ironically, the tax bombshell comes at a time when demand for holiday accommodation in the UK is increasing as cost-conscious Britons choose to stay at home rather than holiday abroad.

Alan Taylor, director of Blue Chip Vacations, an agency representing 600 properties in the West Country, said the company’s planned investment of £1 million this year was now on hold. “It’s an ill-conceived idea that will have a negative long-term impact on the tourism industry,” he said.

Agencies report that owners of country cottages and seaside flats can achieve rental returns of up to 15 per cent. In Newquay, a holiday home hotspot, two-bedroom properties sleeping up to six guests can be let for £1,300 a week in high season.

Meadowgate, a three-bedroom house on the Devon and Cornwall border owned by Kirstie Allsopp, the TV property expert, costs £2,000 a week for off-season lettings, rising to £2,500 in the peak summer months. The house, near the National Trust beach of Welcombe Mouth, is used by Allsopp in her Channel 4 show, Homemade Homes.

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