Britain’s holiday rentals market is booming, with more than 165,000 properties classified as holiday lets, generating £2.1 billion for the economy every year. In England alone, around 67,570 second homes have been “flipped” into holiday homes – an increase of 11,400 since March 2020.
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Property owners are taking advantage of the increase in staycations since the pandemic first limited travel abroad. Flipping enables property owners to pay business rates rather than council tax, so they can make a lucrative income by converting their second home into a commercial property.
If you’re thinking of letting a holiday home, make sure you understand the rules you must follow to become the perfect landlord.
Length of stay
Study the legal requirements to ensure you’re permitted to let your property on a short-term basis as a holiday home. It’s not as easy as just listing it on a holiday letting website.
For a property to be deemed a holiday let, it must be furnished. It must also be available for letting for a minimum of 210 days a year: the owner can use it for up to 22 weeks per year and the property must be let commercially for at least 105 days in the year to benefit from the “furnished holiday let” tax status; a single let must be for a maximum of 31 continuous days – if it continues for longer, you need a formal tenancy agreement, giving your guest the same responsibilities and rights as a buy-to-let tenant; if you permit someone to stay for longer than 31 days, it may affect your tax status and violate the terms of your mortgage.
Health and safety
Holiday rentals are governed by specific gas, electrical and fire regulations. Landlords have a duty of care to guests, so you must carry out a thorough risk assessment for the property and grounds, taking steps to minimise any potential hazards. Provide guests with an information file on how to use the appliances and facilities safely.
Ensure all appliances, fittings, chimneys and flues are maintained properly. An annual gas safety check must be carried out by a registered gas engineer, and you must keep the record for two years: your electrical equipment, if supplied since January 1995, must be marked with the appropriate CE symbol; all privately rented properties must have a valid Electrical Installation Condition Report in place, as a result of new legislation introduced in 2021.
While this law doesn’t specifically include holiday homes, owners must ensure all electrical appliances, fixed installations and circuits are safe for guests. Installations should be inspected and tested every five years by a qualified electrician and electrical appliances should be PAT tested annually.
Landlords must carry out a fire risk assessment and install a smoke alarm on each floor used as a living space. All upholstered furniture must comply with the legal fire resistance requirements. Your insurance provider may require the landlord to take further steps, such as having the chimney swept annually.
A carbon monoxide detector must be fitted in each room containing a solid fuel-burning appliance, such as an open fire or a log burner. It’s also advisable to put a detector in any room that has gas or oil appliances, such as a boiler or oven.
Insurance
Employers’ liability insurance is required by law if you employ anyone at your holiday home such as a cleaner, housekeeper or gardener.
Although not a legal requirement, public liability insurance is advisable in case a guest suffers an accident in your property and launches a claim against you. If you have a mortgage on the property, you will be required to have building insurance.
It can be helpful to join an organisation such as the Short Term Accommodation Association, the sector’s trade body. It helps members keep up to speed with legal and other developments, so they can continue to operate within the rules.
Tax benefits
Currently, the most significant benefit to holiday lets, as opposed to buy-to-lets, is that landlords can deduct the mortgage interest from profits, because it’s considered a business, rather than an investment. Buy-to-let landlords can no longer claim mortgage interest as an “allowable expense” as of the 2020/21 tax year.
However, an upcoming rule change will mean second homeowners will have to prove their homes are let for at least 70 days a year to claim the tax benefits. If they can’t do so, they will pay council tax. The change is coming in from April 2023, as the government endeavours to close the “tax loophole” that benefits second homeowners.
Changes to the tax rules are aimed at protecting genuine holiday lets at popular holiday destinations such as Cornwall, Devon and the Lake District, so they can qualify for business rates. This can bring significant financial benefits to owners of second homes, who will suffer a financial loss in future if they can’t prove their property is let to guests.
Know your market
As well as keeping abreast of the law, landlords of holiday rentals need to attract the right kind of guests. This means knowing your market, especially if you’re doing your own advertising. Make sure your online listing has plenty of good-quality photographs, a comprehensive, well-written description of the facilities and a video tour.
Having quality furniture in the home is a must. People come on holiday to relax, so comfortable, stylish furniture throughout the whole house is essential.
Give guests a warm welcome by providing a welcome pack with information on the house and surrounding neighbourhood. You could also gift small items such as welcome hampers, milk in the fridge and other useful items.
Most importantly, keep your holiday let clean by either hiring a professional cleaner or doing the job yourself. Guests will feel instantly more at ease coming into a pristine home.
The top three things that people are looking for when booking a holiday home are luxury accommodation, beach and coastal locations and pet-friendly properties so their dog can go too, according to research by Sykes Cottages. Other sought-after features include free Wi-Fi, a garden and off-road parking. Three-quarters of respondents say they are considering a staycation, with the most popular destination being the south coast of England.
You can use a company like Sykes Holiday Cottages to manage the property for your convenience, so you don’t have to arrange bookings yourself. They also support property owners in following the best cleaning procedures to promote health and hygiene in their holiday rentals.
Regional legislation
The Housing Act of 1988 introduced critical changes that helped the buy-to-let market in the UK expand. In Scotland, the Housing (Scotland) Act 2006 lays out some of the standards required by law, while a new regulatory framework was introduced in the Housing (Scotland) Act 2014.
The Welsh government announced new legislation in July 2021 to regulate the second home and holiday lets market. It includes stricter taxation on second homes, a mandatory holiday let registration scheme and more support for prospective home-buyers.
In Northern Ireland, the Tourism (Northern Ireland) Order 1992 governs holiday rental accommodation. Planning permission may be required to use your property for a short-term holiday let, depending on the extent to which it will change the character of the property.