Covid-19: Support and tax implications for short-term let landlords

22 July 2020 | Investment

There is barely a sector that has been more affected by the coronavirus pandemic than the travel industry. Globally, countries have closed their borders to visitors, and nationally, restrictions have been placed on non-essential movement.

Although restrictions have been easing, and the travel sector was allowed to reopen on July 4 when hotels, Airbnbs and holiday cottages were allowed to take bookings again, there are some changes which will affect Airbnb hosts and short-let landlords for a long time to come.

In the months since lockdown was imposed, holiday let landlords have been forced to ‘shut up shop’ or adapt. With mortgages and running costs to pay for, they have been faced with the decision to either claim government support or modify their business model by offering long-term lets.

But both avenues have tax implications which need to be considered and planned for. Here, Mike Parkes, technical director at self-assessment provider GoSimpleTax, explains the options:

Tax deferral

Whilst this isn’t a long-term fix, businesses have been offered the option of a tax deferral, allowing them to delay the second payment on account which is ordinarily due on July 31. If landlords choose to delay their self-assessment payment, they do not need to apply; they simply pay in full on January 31 2021.

It is important to keep track of any deferrals and make notes now, so that in January landlords know what is owed.

My advice to those people is record all income and outgoings thoroughly for the next few months. If there have been no earnings, or there has been a huge drop off in income, then consider reducing your payments on account for 2020/21, due in January and July 2021.

That way, landlords will have a clear picture of what needs to be paid on the January return. More people have begun to file early because of this, and it means that it’s one less thing to worry about further down the line.

Business rates relief

For the minority of short-term let owners who currently pay business rates on their property, there is a relief scheme available, which offers a payment holiday for 2020-21. Landlords don’t need to take action; local councils will apply this automatically.

Business support grant

In addition to business rates relief, small businesses can also claim a £10,000 grant, as long as the property is charged business rates and the property was eligible for the Small Business Rate Relief (SBRR) Scheme. Local councils should be in touch to arrange payment.

Change in class from short-term to long-term let

For those who have adapted throughout the lockdown period by turning their short-term let into a long-term let, it’s important to remember to report this as a change in class on the tax return in January 2021. It will be categorised as rental income rather than a furnished holiday let.

Track all Covid-19 expenses

Another element to think about is new expenses arising as a result of Covid-19. For those short-let landlords who opened back up on July 4, new cleaning routines have been required, so keep track of all cleaning costs and receipts, and ensure they are logged for the next tax return.

It’s clear that it is a worrying time for business owners in the travel sector, so it’s important that landlords are on top of their tax now and don’t bury their head in the sand. The schemes are there to help, so use them.

This post has originally been featured in Property Investor Today.