Brexit uncertainty could lead to a rise in demand for holiday let rental homes, which is potentially good news for landlords in this sector, according to Commercial Trust Limited.
The buy-to-let mortgage broker believes that the already growing rental market space could continue to go from strength to strength in the coming months, especially in light of uncertainty over what the outcome of Brexit could mean for passport control.
Andrew Turner, chief executive at Commercial Trust, said: “Possible Brexit scenarios could mean many people have less money to travel abroad and choose to holiday closer to home. At the same time, if it becomes more laborious and possibly costs more to travel to Europe after Brexit, this too could have an impact on holiday destinations.”
Furnished holiday lets (FHL) are viewed as businesses by HM Revenue & Customs (HMRC) and consequently, the tax treatment is different to traditional buy to let income.
FHLs have not been impacted by the changes to buy-to-let mortgage interest tax relief, meaning an FHL landlord can currently still claim 100% of the interest paid on their mortgage.
Furthermore, income from FHLs may be invested into a pension, where it may benefit from tax relief under present law.
Landlords of FHLs are also able to claim capital allowances on wear and tear and furniture replacement, whilst also having the ability to claim capital gains tax relief as a business.
Net yields on FHLs can also be competitive, compared to returns on buy-to-let investments.
In June 2018, property fund Second Estates indicated that FHLs had an average net yield of 6.1%, compared with 5% for residential buy to lets.
It stated that the average weekly income on a holiday let was £563, whilst it was £161 for a typical buy-to-let.
Turner added: “The upshot is that landlords who use their rental homes as holiday lets, could potentially do very well out of Brexit, as a result of growing demand.”