Turning your second home or your holiday let investment into a successful holiday let business is not actually that complicated.
We have a few tips to help you make the most of the available benefits from both a tax and practical perspective.
Whether you are embarking on holiday letting purely as an investment exercise, or if you are holiday letting your second home to help with running costs. The principles for success remain broadly similar.
This guide is designed to look at the principles of setting up your holiday let as a business. For more information on the nuts & bolts of holiday letting, see our Property Letting Guide. Where we address some of our new owners most common questions and concerns.
It’s all in the Preparation
Everyone who sets up their second home as a holiday let is hoping to have as much of a stress-free experience of having paying guests in their home as possible. The key to managing this is in the set-up of the cottage and the information available to guests.
We will work with you every step of the way to make sure everything is in place to allow guests to enjoy their holiday without needing to pick up the phone but here are a few tips to get you started:
- Imagine you have booked your cottage for a holiday – what would you expect to find to make your stay comfortable?
- Equipping your cottage in a way that you would be happy with were it you on holiday is a really good place to start.
- A comfortable night sleep will be key to your guests overall experience, so it is worth doing some homework to find really comfy mattresses. This can be done without breaking the bank (just ask us if you get stuck, we have some good mattress options that have worked well in other cottages).
- It is a really good idea to ‘road test’ your cottage as if you were a guest, or inviting some friends to stay and do just that can be a good way to get a different perspective.
- If you would like, we can arrange a member of the Big Skies team to pop over and check everything out for the sorts of things we know sometimes get forgotten.
- Make finding out how things work straightforward:
- Often just leaving the instruction manuals is not the most straightforward way to help guests know how to use things.
- A simple ‘At A Glance’ sheet is enormously useful, with details of things like the WiFi Code, any foibles with gadgets or heating etc, will help guests fend for themselves during their stay.
- Providing a clear and easy to read ‘Guest Information’ makes all the difference. We will provide you with a lovely binder complete with all the information on the local area for your guests and together we will personalise this with information specific to your home.
- Furnish with Practicality & Style in Mind:
- The standards of Norfolk holiday cottages is pretty high. Guests are discerning and to attract the most bookings your cottage needs to catch their eye.
- We can help with practical advice on this but as a rule of thumb it is a false economy to put cheaper items in a holiday let. Good quality fixtures and fittings will cope with the increased use and footfall much better.
- We have a really handy ‘inventory template’ that you might find useful. It is not an all-encompassing list but is often useful for remembering smaller items that you might not necessarily use but guests might (like egg cups or a tea pot).
- Make them feel Welcome:
- We all like to feel special when we go on holiday, so leaving a small welcome gift or hamper for your guests is a great way to make them feel wanted.
- If guests feel that the owner cares about their experience of staying in their home they are much more likely to forgive any small things that might be missing or not working during their stay.
- We can help with welcome packs or give you practical advice on how to make guests feel special with very little financial outlay on your part.
- Keep on top of things:
- Finding the right housekeeping team for your property is an essential part of ensuring a trouble-free experience of holiday letting. We can help you with this if you don’t already have a housekeeper in place.
- Your housekeeper will let you know if you need to replace some glasses or some of your towels are past their best but just in case they miss things, one of our team will pop out to you cottage on a regular basis to check everything over and we will let you know if anything needs updating or replacing.
- Encouraging feedback from your guests is a great way of getting good ideas of small ways to improve the experience of future guests too.
Qualifying for Business Rates
Unlike a longer-term rental property, a holiday let is a business and therefore you are able to move from residential council tax to commercial business rates. Increasingly local councils are keen for holiday let owners to register their holiday cottages as businesses and to move them to business rates.
As a holiday let business owner, there are some clear benefits to registering for business rates. The first is that you can take more control over your refuse and recycling collections. The main benefit of this is that during the peak season you can arrange a more frequent collection of the bins, particularly for larger properties this is very useful. It helps prevent issues of overflowing bins when collections are bi-weekly. Equally, you can reduce the number of collections in the low season when you may not be welcoming so many guests.
The second benefit is dependent on how business rates are being calculated but at the time of writing, it is likely that your holiday let business would qualify for Small Business Rate Relief and in many cases this will significantly reduce your business rates burden, in many cases to zero. You will be required to pay for your bin collections but as noted above having more control of this is no bad thing.
There has been some abuse of the system with less scrupulous owners registering for rate relief but not in fact letting their cottages a great deal. To discourage this, many councils are introducing a minimum number of nights let requirement to qualify for Business Rates. This in general, is around 70 nights let.
Qualifying as a Furnished Holiday Let
In order to qualify for the tax benefits of running your property as a holiday let, you need to qualify as a Furnished Holiday Let. This is a different benchmark to the one previously mentioned that might be in place with your local council to qualify for business rates.
As it stands just now, in order to qualify as a Furnished Holiday Let your property must:
- Fully furnished.
- Available to let commercially for 210 days per year, with the intent to make a profit.
- Actually let out for at least 105 of these days.
- Not occupied by longer term tenants (more than 31 days at a time) for more than 155 days per year.
You should speak to your accountant for more detailed information on qualification and tax benefits but we have a brief overview put together for us by local accountancy firm Lovewell Blake: