Holiday Lets, Serviced Accommodation And The 5% VAT Rate

Chancellor Rishi Sunak's recent summer statement announced a number of initiatives to help the UK economy recover. Apart from raising the Stamp Duty Land Tax threshold which I discussed last week, he reduced VAT from 20% to 5% in the hospitality sector ...

Holiday lets and serviced accommodation will benefit from the temporary VAT reduction meaning a night's visit that would normally cost £120 will now cost the customer £105. This is a significant saving if a family stays for a couple of weeks at your property.

Just like hotels, holiday lets and serviced accommodation are subject to VAT. This means that if your annual turnover exceeds £85,000 you must register for and charge VAT on the rental income at 20%. Since you may be dealing direct with the consumer, who cant recover this VAT, this can make you uncompetitive against your non VAT registered neighbour.

As an example:

If a family of four wanted to stay in a British costal property for two weeks, they could be looking at a final bill of £2,400 just on the accommodation. This may seem too much for many, but with the VAT reduction to 5%, this now becomes £2,100 which is a significant reduction of £300 on the holiday.

The Chancellor is hoping that the reduction in VAT from 20% to 5% on holiday lets and serviced accommodation is going to have a positive effect on the market.

Fingers crossed that your booking will jump considerably in the coming months.

If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.