Tax advice of the week: Hang on to your second home

Second-home owners have been celebrating after the government was recently forced to abandon plans to abolish tax breaks for furnished holiday lets, which would have cost owners an average of £4,000 a year, says The Sunday Times.

A day before the relief was to be abolished, the government was held to ransom by the Tories, who only agreed to fast-track the Finance Bill through Parliament if it deleted the tax change. The Conservatives pledged to keep the tax relief, though if Labour wins the election the change could still go ahead, along with the abolition of entrepreneurs' relief.

One of the main advantages of furnished holiday homes is that the taxman allows the owners of the property to offset the costs against other income, reducing their overall tax bills. To qualify, the property has to be available for at least 140 days a year and actually let for a minimum of 70 days. "As long as the 'business' is run for at least a year, it qualifies for entrepreneur's relief, where the first £2m of capital gains are taxed at 10% instead of the usual flat rate."

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up