Rental income from residential property, such as a buy-to-let where a tenant lives in the house as his main residence, is not subject to VAT.
On the other hand, rental income from holiday letting is subject to VAT, if the income exceeds the UK registration limit, currently £79,000 per annum.
But landlords living outside the UK, who let holiday homes within the UK, may be classed as non-established taxable persons (NETPs) and under regulations which came into effect on 1 December 2012, might be required to register for VAT in the UK whatever the level of income.
Since 1 December 2012, a business or person established outside the UK has to register for VAT in the UK if they generate any income from taxable sales in the UK. Consequently, income from UK holiday lets owned by NETP landlords is subject to VAT as NETP landlords no longer have the opportunity to make annual taxable sales of up to £79,000 before needing to register for VAT.
However, if the landlord has a fixed UK business establishment, such as a UK letting agent managing the property on their behalf, then they gain the benefit of the £79,000 VAT threshold.
Prime rents in the Home Counties rose for the second consecutive quarter in 2014, according to the latest figures from Knight Frank.
The report shows that Home Counties residential rents increased by 2.6% between April and June, with 'tenancies agreed' up by 50% when compared to this time last year.
The rise in this region is being driven by a strong demand from corporate tenants. In the first half of 2014, nearly 40% of all tenancies agreed were with international tenants.
Meanwhile, the latest UK Student Housing Market View from CBRE reports that prime student accommodation in the regions is continuing to outperform other property asset classes, with yields reaching 6.15%.
The findings also highlight a growing interest in this sector from institutional investors.
"Recent reports confirm demand for rented accommodation is strong, which currently makes the private rental market a particularly attractive investment opportunity." commented Alan Stewart, director and head of residential lettings and management at Caxtons.
Life is tough, very tough. Most of us have had some first hand experience of the economic squeeze during the past four years
– and belt tightening has become an art form as well as a way of life. But what if you run out of cunning plans to keep the wolf from the front door? What if you can no longer meet your monthly financial commitments? What if you can't pay the mortgage?
Alan Stewart BSc FRICS MCIArb, Director & head of Residential Lettings & Management at Caxtons says think carefully before selling up. It may be better to consider letting your home – undoubtedly a very valuable asset – while you rent a smaller property for considerably less. This way you will retain your home and ease the pressure on what is probably a desperate situation.
If you think that becoming a 'reluctant landlord' is for you to allow time for the property market to recover and economic-hard times to abate, then there are a number of issues to explore.
If you have a mortgage, it is sometimes possible to let your property without the complication of changing your mortgage and becoming a Buy-to-Let landlord. As long as you obtain permission from your lender by way of a 'Consent to Let', then you will not breach your mortgage agreement. What is more, you will usually remain on your existing mortgage arrangement and pay your current interest rate. Every lender is different though and some may impose additional charges so be sure you understand exactly what you are signing up to.