How much stamp duty could you save on a holiday let? | moneyfacts.co.uk

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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 26/02/2021

At the start of the week Boris Johnson set out his plan to unlock the UK from Coronavirus restrictions. This set many consumers thinking about their holiday plans and led to a surge in the number of holidays booked. Holiday firms TUI and Hoseasons said demand had beaten all previous records and Thomas Cook reported an increase of over 100% in visitors to its website on Monday.
An alternative for some would be to invest in their own holiday home in the UK. This not only provides a guaranteed holiday destination but can also be used to earn income as a holiday let. And, with rumours suggesting the Chancellor will announce a further extension to the stamp duty holiday in next week’s budget, those acting now could also save thousands of pounds in tax on their holiday let property.

How much stamp duty could you save?

We have compared the stamp duty savings for holiday let properties in the four most popular UK holiday destinations this year, based on a recent survey of UK adults conducted by Holidaycottages.co.uk.
St Ives, Cornwall topped the charts as the most popular UK destination and has an average property price of £416,892. Prior to the stamp duty holiday this would have cost £23,351 in tax, now this is reduced to £12,506 – a saving of over £10,845.
The next most popular UK destination was a tie between the Scottish Highlands and Devon. The average property price in Fort William is £167,413 and buyers here could expect to save £848 in stamp duty. Those purchasing a property in Torquay would save £2,264 based on the Torquay average property price of £238,195.
The Lake District was the next placed most popular destination and with an average property price of £320,784, buyers here could make substantial savings on their stamp duty. The average price for a property in Keswick is £320,784, under stamp duty rules before the holiday reductions, buyers would have paid £15,662, now this is reduced to £9,623 – saving more than £6,039.
Our stamp duty calculator shows exactly how much stamp duty buyers will pay under the current holiday arrangement.

Is there enough time to buy a holiday let and still make stamp duty savings?

If the stamp duty holiday is not extended at the Budget next Wednesday, then those wanting to buy a holiday let and secure a stamp duty saving will only be able to achieve this by using a form of secured loan. This would use the equity in your current property to either purchase your holiday let or support the deposit for a holiday-let mortgage. Secured loans are a faster way to complete a property purchase. The Secured Loan Index from Loans Warehouse reported secured loan completions taking an average of 13 days in January 2021. A standard purchase mortgage or remortgage would take months to complete. Borrowers will have to pay a fee and usually a higher rate of interest than a traditional mortgage for this level of service, but if speed is key this is the faster route to completing your property purchase.
Borrowers can compare the best secured loan rates using our charts or speak to our preferred secured loans broker for advice about their borrowing options.

How does a holiday let mortgage work?

Those purchasing a holiday let in the UK will need to use a specialist mortgage product, these are called holiday let mortgages. Monmouthshire Building Society is one lender offering these specially designed mortgages for those with holiday lets and has lent over £50m to buyers in this sector. Borrowers can access up to 75% loan-to-value of the holiday let they want to buy and these can be repaid up to the age of 85 years old. Monmouthshire Building Society will also accept those wanting to use their holiday let for their own personal use as well. Their requirements state that the property must be available to let for 210 days of the year and let for at least 105 of these. Any letting exceeding 31 days must not exceed 155 days.

Our holiday let mortgage guide contains more information or our preferred mortgage broker can provide advice about the best holiday let mortgages. Alternatively we also show the best buy-to-let UK mortgage rates on our charts, borrowers should check that these lenders will accept holiday lets.

House price source: Average house price data based on sold prices from Rightmove.

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