Holiday Let Rules & Regulations Guide
Planning to rent out your property as a holiday let? Before diving into the vacation rental business, it's important to understand the rules and regulations that govern holiday lets.
From local zoning laws to tax obligations, there are a number of legal considerations to keep in mind to ensure a smooth and compliant operation. In this comprehensive guide, we will walk you through the key rules and regulations that apply to holiday lets, providing you with the knowledge and insight you need to navigate the regulatory landscape.
Discover the requirements for obtaining the necessary permits and licenses, learn about safety standards and insurance coverage, and get acquainted with the booking and cancellation policies that can protect your interests as a host.
Whether you're renting out a property on a short-term basis or considering becoming a professional holiday let manager, understanding the legal framework surrounding holiday lets is essential to both protect your investment and provide a seamless experience for your guests. Stay informed and compliant with this in-depth guide to holiday let rules and regulations
Are holiday lets regulated ?
Yes, holiday lets are regulated in many countries and regions.
The rules and regulations governing holiday lets can vary significantly depending on the location, but there are some common areas of regulation that holiday let owners and operators need to be aware of.
Planning laws
One of the key areas of regulation for holiday lets is local zoning and planning laws. In many areas, there are specific zoning designations or permits required to operate a short-term rental property in the future as of 2024 this is not the case.
Holiday let taxes
Another important area of regulation for holiday lets is taxation.
Holiday let owners may be subject to a variety of taxes, including income tax, capital gains tax, and in some cases, a special tourism or occupancy tax.
The specific tax obligations will depend on the local laws and the way the holiday let is structured (e.g., whether it is a primary residence, an investment property, or part of a larger holiday let business).
Holiday let owners need to ensure that they are properly registering their rental income and paying all required taxes, your accountant should advise you on the best route for this
Health & Safety
Safety and building standards are also an important consideration for holiday lets. Holiday let properties need to meet certain minimum standards for things like fire safety, electrical wiring, and structural integrity.
There may also be specific requirements around the provision of amenities, the condition of the property, and the maintenance of common areas.
Failure to comply with these safety and building standards can result in fines, penalties, or even the revocation of a holiday let license or permit.
New 2024 rules on UK holiday lettings
In recent years, there has been a growing focus on regulating the holiday let industry, particularly in response to concerns about the impact of short-term rentals on local housing markets and communities.
As a result, many jurisdictions are introducing new rules and regulations for holiday lets that will come into effect in the coming years.
Licensing
One of the key changes on the horizon is the introduction of mandatory registration or licensing schemes for holiday let properties. This means that holiday let owners will need to register their properties with the local authorities and obtain a license or permit to operate as a vacation rental.
The requirements for these schemes can vary, but they often include things like safety inspections, compliance with local planning and zoning laws, and the payment of any required taxes or fees.
Maximum holiday let use
Another area of new regulation is the introduction of limits on the number of days that a property can be rented out as a holiday let.
Some jurisdictions are implementing caps on the maximum number of days per year that a property can be used as a short-term rental, in an effort to balance the needs of the tourism industry with the preservation of long-term housing stock.
These limits may also be accompanied by additional requirements, such as the need to obtain a special permit for properties that exceed the cap.
In the UK this is only in London currently.
Requirements for Letting a Holiday Property so that it Qualifies as a Furnished Holiday Let
To qualify as a furnished holiday let (FHL) for tax purposes, a property must meet certain criteria set out by the UK tax authorities.
These requirements are designed to ensure that the property is genuinely being used for holiday purposes, rather than as a long-term residential rental.
The key requirements for a property to qualify as an FHL are:
Requirements for Letting a Holiday Property so that it Qualifies as a Furnished Holiday Let
To qualify as a furnished holiday let (FHL) for tax purposes, a property must meet certain criteria set out by the UK tax authorities. These requirements are designed to ensure that the property is genuinely being used for holiday purposes, rather than as a long-term residential rental.
The key requirements for a property to qualify as an FHL are:
Be fully furnished.
Be situated within the UK, or a country within the European Economic Area (EEA.)
Be available for letting for a minimum of 210 days of the year.
Be let out for a minimum of 105 days of the year.
Not be occupied by any long-term tenants for more than 155 days of the year.
Not be occupied by tenants for 31 days of the tax year.
Meeting these criteria can provide some tax advantages for holiday let owners, as FHLs are treated more favourably than standard residential rental properties for the purposes of income tax, capital gains tax, and other taxes.
However, it's important to note that the rules and regulations around FHLs can be complex, and holiday let owners should seek professional tax advice to ensure they are complying with all relevant requirements.
Legal Requirements for Letting a Property in Scotland
If you are thinking of buying a property to let in Scotland or if you already own a second home and are considering letting it out then you will need to know about the short term accommodation licence scheme.
From 1st October 2022, all new holiday let owners in Scotland must have a licence from the relevant authorities before letting out a property to guests.
Property owners who have been letting out their property before October 1st 2022 have until the 30th of September 2023 to apply for a licence. By 1st July 2025, all short-term lets will need to be licensed.
Can I build a holiday let on my land ?
Building a holiday let on your own land can be a viable option, but it's important to understand the legal and regulatory requirements before proceeding. The ability to construct a holiday let on your land will depend on a variety of factors, including:
Planning
Holiday lets now have a use class of C3 which is to be used as a furnished holiday let, if your land has another use class then it will need to be changed before work can take place, this is hard to get however if you can argue a mixed use class you may have a higher chance of an easier pass.
It's important to note that the specific requirements for building a holiday let on your land can vary significantly depending on your location and the local regulations.
Consulting with a local planning or legal expert can help you navigate the process and ensure that you are complying with all relevant laws and regulations.
Are holiday lets vatable ?
In the United Kingdom, the general rule is that holiday lets are considered a "business activity" and are therefore subject to VAT. This means that holiday let owners are required to register for VAT if their annual turnover from the holiday let exceeds the current VAT registration threshold, which is £85,000 per year.
Once registered for VAT, holiday let owners must charge VAT on the rental income they receive from guests, at the standard rate of 20% (as of 2023). They can also claim back the VAT on certain expenses related to the operation of the holiday let, such as the purchase of furnishings, maintenance, and utilities.
However, there are some exceptions and special rules that can apply to holiday lets when it comes to VAT:
Furnished holiday lets: In the UK, furnished holiday lets (FHLs) that meet certain criteria can be treated as a special type of business activity, which may allow the owner to claim certain tax advantages. The VAT treatment of FHLs can be slightly different from standard holiday lets.
Residential property conversions: If a holiday let is created by converting a residential property, the VAT treatment may be different, as the conversion work itself may be subject to a reduced VAT rate.
Overseas properties: The VAT rules for holiday lets can vary significantly in other countries, so holiday let owners with properties outside the UK should research the local VAT requirements.
It's important for holiday let owners to seek professional advice from a tax specialist to ensure they are complying with all relevant VAT regulations and are taking advantage of any available exemptions or special treatments.
Are holiday lets commercial property ?
The question of whether holiday lets are considered "commercial property" or "residential property" is not a straightforward one, as the classification can vary depending on the specific circumstances and the relevant laws and regulations.
In general, holiday lets are often treated as a form of residential property, rather than commercial property, for the main reason of the property could still be used as a residential dwelling.
How long can you stay in a holiday let ?
The length of time that guests can stay in a holiday let is typically determined by the terms and conditions set by the holiday let owner or operator, as well as any relevant local regulations.
In general, holiday lets are designed for short-term, temporary accommodation, rather than long-term residential living. Most holiday let owners and operators set a maximum stay duration, often ranging from a few nights to a few weeks, depending on the size and nature of the property.
Some common guidelines for stay durations in holiday lets include:
if you have a guest stay for over 28 days this is VAT exempt.
In London you can’t advertise your property for short stays longer then 90 days per year.
Health and Safety Regulations for Holiday Lets
Ensuring the health and safety of guests is a critical responsibility for holiday let owners and operators. There are a range of regulations and standards that must be met to provide a safe and compliant holiday let experience.
Some of the key health and safety regulations for holiday lets include:
Fire safety: Holiday let properties must meet strict fire safety standards, including the installation of working smoke alarms, fire extinguishers, and clear emergency evacuation plans. Owners may also need to obtain a fire safety certificate from the local fire department.
Gas and electrical safety: All gas and electrical installations and appliances in a holiday let must be regularly inspected and certified as safe by qualified professionals. This helps to prevent the risk of gas leaks, electrical fires, and other hazards.
Accessibility: Holiday let properties should be designed and maintained to be accessible for guests with disabilities, with features like ramps, wide doorways, and adapted bathroom facilities.
Risk assessments and emergency planning: Holiday let owners should conduct regular risk assessments to identify and mitigate any potential hazards on the property. They should also have comprehensive emergency plans in place, including procedures for responding to accidents, injuries, or other incidents.
Compliance with these health and safety regulations is not only a legal requirement but also a crucial aspect of providing a safe and enjoyable experience for holiday let guests.
Failure to meet these standards can result in fines, liability issues, and a damaged reputation for the holiday let business.
New Planning Class for Holiday Lets in England
Introduction of a new planning use class for short-term lets in England (called C5) will take them out of the dwelling-house class (C3) they are currently in. Only new short-term lets would require planning permission, with existing ones to be automatically reclassified.
Any planning permission requirements will not apply to people renting out their main home for less than 90 nights a year. However, other short-term lets (those that are 'a dwellinghouse that is not a sole or main residence, for temporary sleeping accommodation for the purpose of holiday, leisure, recreation, business or other travel') that are let out for any number of nights per year will be in this new planning class.
If a council wants to limit dwelling-houses newly becoming short-term lets, they will be able to bring in what's called an article 4 direction to require them to get planning permission to do so.
The new guidance means properties will be able to move freely between short-term let class and dwelling-house class (called permitted development).However, local authorities may be able to restrict this under article 4 direction.
To make an article 4 direction, local authorities would need to provide robust evidence and limit this restriction to the smallest geographical area possible. A local authority will likely have to give a year’s notice of introducing such a direction.
If your property isn’t currently operating as a short-term let or you're looking to buy a holiday let, you might consider doing so before an Article 4 direction is introduced in your area so that it automatically sits in the holiday let planning class.
In the meantime, we will continue to engage in government and other decision makers highlighting the contrbution that holiday lets and their visitors make to local economies, especially compared to empty homes and the failure to build on plots with planning permission (known as landbanking).