Are you one of the many buy-to-let landlords struggling with the new tax rules under Section 24? If so, you're not alone, and you're certainly not stuck. There's a way to escape this burden, and it's called transforming your rentals into serviced accommodation. In this blog post, we'll dive into what Section 24 is and how it affects you as a landlord. We'll also explore what serviced accommodation is and why it's a viable alternative to traditional buy-to-let. Finally, we'll walk you through how to make the transition, so you can start saving money and maximising your profits.
First, let's discuss Section 24. This new legislation introduced by the government in 2017 restricts tax relief on mortgage interest for buy-to-let landlords. Essentially, it means that landlords can no longer deduct all of their mortgage interest payments from their rental income when calculating their tax bill. Instead, they receive only a basic rate reduction, which can put a significant dent in their profits. For many landlords, this has led to a significant increase in their tax bills, and some are now struggling to make ends meet.
This is where serviced accommodation comes in. Serviced accommodation, also known as short-term rentals or vacation rentals, involves renting out your property on a short-term basis, typically for a few days to a few weeks at a time. Rather than having long-term tenants who stay for months or years, you'll have a steady stream of short-term guests who pay a premium rate for the convenience and flexibility that serviced accommodation offers.
One of the benefits of serviced accommodation is that it's not subject to the same tax rules as buy-to-let. Because it's considered a trade rather than an investment, landlords can deduct all of their expenses, including mortgage interest payments, from their rental income, resulting in a lower taxable income and a lower tax bill.
Another benefit of serviced accommodation is that it typically generates higher rental yields than traditional buy-to-let, which means more profit for you as a landlord. Because you can charge a premium rate for the added convenience and flexibility of short-term rentals, you'll be able to generate more income per unit than you would with traditional long-term rentals.
Making the transition from buy-to-let to serviced accommodation may seem daunting at first, but it's actually a relatively simple process. The first step is to identify the right location for your property. Serviced accommodation tends to perform best in tourist hotspots and major cities, where there's a high demand for short-term rentals. Once you've identified your ideal location, you'll need to furnish your property with high-quality furniture and appliances to create a comfortable and inviting space for your guests.
Next, you'll need to market your property through online platforms such as Airbnb and Booking.com. These platforms make it easy to promote your property to a global audience of travellers, and they handle all of the bookings and payments on your behalf. You'll also need to provide cleaning and maintenance services to ensure that your property stays in top condition and meets your guests' expectations.
Conclusion:
In conclusion, escaping Section 24 with your buy-to-lets is entirely possible by transitioning to serviced accommodation. Not only will this alternative generate higher rental yields and offer more flexibility, but it will also help you avoid the harsh tax rules of buy-to-let. With careful planning and execution, you can make the transition smoothly and maximize your profits as a landlord. So why not give it a try and discover the benefits of serviced accommodation for yourself?
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