Any income you get from your short-term let property is just like any other income, so you will pay tax on all income that exceeds your personal allowance, which in the 2022/2023 tax year is £12,570, and includes your rental income. You can read more about this in our article How is my buy to let property taxed?
If you have a holiday let, there are appealing tax benefits. As they’re classed as a business rather than an investment, you’re able to deduce 100% mortgage interest costs from rental income before your tax bill is worked out. You also get capital allowances for property improvements and wear and tear. However, you’ll need to factor in regular change-overs which can be expensive if you need someone to do this for you.
If your gross annual income from letting out your property is £1,000 or less, then thanks to property allowance rules, this income is not taxable and it doesn’t need to be reported to the taxman. You cannot claim any loss or deduction for property expenses if you use the property allowance relief. Find out more about the property allowance at Gov.uk.
Do you have a property you let out on a short-term basis to tenants or do you own a holiday let? Have you found it a good investment? We’d be interested in hearing from you. You can join the money conversation on the Rest Less community or leave a comment below.