Holiday Lett

DrMinky

My wife and I own a small holding and decided earlier this year to let part of our house ( annexe ) out as a holiday let. Although the annexe is a separate dwelling it does not have its own individual status with regards to utilities or council tax. We would like to know if there are any tax implications and what would happen should we decide to sell in 5, 10 or 20 years time?

Guest101

Well you'd have to do a self assessment tax return for the income generated, I dont think this would count as a lodger.

As for selling, dont understand what you mean. Sell the annex seperately? or?

00ec25

Income Tax
it appears you want to go under the Furnished Holiday Home income tax rules, these are different to the "normal" let property rules and can have advantages in certain circumstances. However note carefully the qualifying conditions for FHL

educate yourself here http://www.hmrc.gov.uk/budget2010/fhl-qa-3755.pdf then post back if there are bits you don't understand

CGT
part of your property will be liable for CGT since part of it is used exclusively for business purposes

Council tax
you should register the annex as a separate dwelling and get its own CT assessment. This will be a lot simpler than trying to apportion a part of the whole for business "rates"

Itismehonest

Much depends on what happens when/if you do this but your annexe would be treated as your 2nd home for CT purposes.
When it comes to selling there can be problems with people trying to get mortgages for mixed use properties.

lincroft1710

If the annex has its own kitchen, bathroom, living room/bedroom and has either its own access or access from hallway of main house, then it should have its own council tax band. Depending on how many days per year it is available to rent, it may be subject to business rates rather than council tax.