[HesterF]

Thanks Both!

Orinoco - our mortgage is our own house mortgage (i.e. it includes the house, all the outbuildings and land but is not specifically for the holiday cottage). It's interest only - haven't yet figured out how we'll pay off the capital but if we don't we'll just sell it in 25 years time by which time we'll probably be over the whole hard work lark. We maximised the mortgage in order to use some of our capital to fund the holiday cottage conversion - and other work that has to be done. I think the only way I could deduct it from the tax on the holiday let income would be if I took out a loan specifically for the holiday cottage and then used the capital to pay a chunk off our mortgage instead. But then it would depend on getting a rate on the loan that was as good as that on our mortgage which might be tough. I'll read the FHL regs- sounds like it could be a great read! Our buildings are all grade 2 listed as well which does make everything a lot more complex - although I don't know quite why the planners are currently a month over their target decision date and that's before we've even started the building control step.

Goosepimple - those sites are great to know. I think we'll start off paying somebody else to do the hard work but once enough people have stayed to pass on a good word (hopefully), I'll try advertising it myself in which case I'll head straight for the ones you mention. I think I've looked at Cottages4you when I've rented for us in the past.

H

[doganjo]

Presumably you wouldn't have been able to buy the cottage separately from your own house, nor vice versa,  and therefore the mortgage covers the whole thing.  Work out the proportion of value when you bought the property and allocate part of the mortgage interest to the cottage.  I can see no logical reason for that not to be allowable. Or at least the part of the mortgage you used to do the renovations.

[Marches Farmer]

Does your planning permission permit the option of selling separately? Our cottage is Grade II within the curtilage of our Grade II farmhouse and permission is for not more than 28 consecutive nights let to the same person.  We aimed for 4* or 5* from the beginning and think that a few £000 on a walk in shower and good quality furniture has paid for itself many times over as we can let it for more.  We're with Premier Cottages, which is a 4* and 5* owner's co-operative - we pay for our share of the glossy brochure, PR and website maintenance but guests book direct with us, so no agency rake-off.  Lots of the agencies nowadays are part of a big US-owned group.

[Orinoco]

Hi I could do with some holiday cottage advice generally so starting a new thread.

[HesterF]

Just seen the latest replies. Marches Farmer, our situation is very similar. Our house is grade 2 listed and the outbuildings around our courtyard (including the holiday cottage to be) are grade 2 listed in their own right. No, we could never sell it off separately (planning is clear on that) - nor would it make financial sense since we'd have another family living just across the yard which would devalue our own house. But interesting to be able to allocate some of our mortgage repayments to the build costs - that should be fairly simple to calculate (= build plus furnishing costs) - for the tax calculations. And as we pay off the mortgage, maybe we could keep that part as the last to pay off (like juggling mortgages between the house you live in and another buy-to-let one).

H

[bazzais]

You could open a Ltd company and sell the property to the Ltd company - no real money would need to change hands - and the business could pay back the 'loan/debt' through its future profits to you over time.

IMO keep it simple - wing it

[newkidontheblock]

Following on to this thread, if the limited company runs the business I would think the company would also have to own the property, so if I buy a potential holiday let personally I don't think HMRC will let me use it to run a limited company holiday let business.
I want to live in the property and run the holiday letting business from it but if I buy it through a limited company I will have to pay corporation tax on the sale price plus maybe the on any gain, whereas if its my only property I will be able to take all the profit from the sale including any gain from renovation work done.
So although I would have thought using a limited company would provide personal protection in case a guest injured themselves on site and sued, and it's a more efficient way to run a letting business generally, with the changes to dividends and the tax on sale I'm not sure which structure is the most beneficial?

[landroverroy]

I would just get a good accountant and the cost of their advise should be covered several times over by the financial efficiency they advise.

[CarolineJ]

Following on to this thread, if the limited company runs the business I would think the company would also have to own the property, so if I buy a potential holiday let personally I don't think HMRC will let me use it to run a limited company holiday let business.

The company could rent-to-rent - this is catching on in big cities now where HMO (houses of multiple occupation) landlords are renting 3+ bedroom properties from other landlords specifically with aim of subletting them as HMOs and making a profit without having the capital outlay.  So you as an individual could rent the property to the limited company.  You'd have to pay personal tax on the income from the company, but the corporation tax would be lower because the company would have the rent to you as an expense, reducing profit.  Whether that works out beneficially to you or not is something you'd have to calculate.