How to avoid paying the second house tax with furnished holiday letting

While owning a second home has its advantages, having to pay a second house tax isn't one of them. With recent changes in the UK tax laws, however, more homeowners are facing payment of a new tax on their second homes, and some are saying "Enough.".

In fact, they are now considering using their second homes as "Furnished Holiday Letting". Yes, of course, they'll have to pay tax on the income they earn, but it can better than paying a second house tax on a home that sits empty much of the year.

Rules to follow to claim your house as "Furnished Holiday Letting"

Of course, like everything, there are certain UK tax rules you must fit into, before you can avoid paying a second house tax and claim "Furnished Holiday Letting" instead.

Location - If you own a home in the United States, South America or Asia, you can't claim it as "Furnished Holiday Letting", even if it is. Your second house must be located within the United Kingdom or in the European Economic Area to be able to qualify.

Must Be Furnished - If your second house is sitting empty, you'd better put some furniture in it before you try to claim it as "Furnished Holiday Letting". This is also where you should calculate is it worth spending thousands of pounds on furniture for your second home just to let it, or should you just pay the "second house tax" instead?

Available 210 Days a Year, Let 105 Days - If you think you can claim "Furnished Holiday Letting" when you're just letting it a few days a year, think again. Under UK tax rules, your second house must be available to rent out at least 210 days a year and, at the end of the tax year, you must have managed to let it at least 105 days during the year. If not, you're stuck paying the usual "second house tax".

Don't Try to Let Cheap to Family - Some homeowners have thought they could pull a fast one by renting cheap to family or friends and still claiming it a "Furnished Holiday Letting". You can't. You must let your house at the going rate, with no discounts or special deals allowed for people you know.

31 Day Limit - Other people have thought they could just move a family member in and claim they were a "long-term renter". Under the "Furnished Holiday Letting" rules, that's not possible either. No one person or group can rent for longer than 31 days at a time, otherwise that's not holiday letting. You can however rent to the same person or group more than once, if they love your place for a holiday, but each time must be no longer than 31 days, and there has to be time in-between each rental.

Advantages and Disadvantages of Furnished Holiday Lettings

If you don't care about other people staying in your second home nor do you mind the inconvenience of arranging to let your house to strangers, renting your second house as "Furnished Holiday Lettings" can be a smashing way to make some extra money while also avoiding the second house tax.

However, if you're the type of person who would go crazy dealing with renters, and have no interest in making arrangements to have your second home cleaned every few days, or having to cope with the damage renters can cause, you may just be better paying the second house tax. In the long run, it is far more convenient.

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