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Hi Everyone
I have a property in Spain which I rent out on a long term let of 450 euros, but this means we cant use the property for holidays. I have put some figures together and wanted to see if you think it makes sense to rent it as a holiday let.
Current income on long term let
450 euros a month = 5400 euros a year
Annual payment to management company of 400 euros
So annual income of 5000 euros if no other expenses are incurred.
Workings for Holiday let
Rented for 15 weeks a year at an average of 240 euros (after cleaning costs) = 3600
Tax rebate for holiday let of 1440 euros a year
I have found a management company who will not charge a holding fee for key
So annual income of 5040 euros if no other expenses are incurred.
In the summer months the property will rent for around £350 a month and in the winter around £200 a month.
Do the above figures seem realistic ? Do you think I could rent for more than 15 weeks a year?
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We let out our villa on short term lets and 15 weeks is about average ( before the crunch it used to be 20+)- but alot depends on the locality etc. We are on the coast and, for us, it is only viable for us to lt out in the summer. We also have a fair electricity usage - ie 125kw is included in the price - any extra is paid by the guests.
Do you have a garden and/or pool to maintain? This could affect your profits.
This message was last edited by randolph on 14/01/2014.
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Hi Randolph
Thanks for the reply
Which ever route we went down I think the costs would more or less be the same e.g. community charges
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Not sure what you mean by "tax rebate for holiday let" ?
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You can claim back tax on any losses you make on a holiday let, because my rental income doesnt cover my mortgage I can declare a loss. It does need to be rented it out for a minimum number of weeks which I think is 15.
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Are you working on the UK system for holiday lets?
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Hello
We have been renting our apartment out as a holiday let for 6yrs which suitts us as we spend at least 3mths of the year out here ourselves. We also rent out a few properties in the UK on long term residential basis. You are correct in thinking that you can claim a loss if your income is less than your mortgage and other costs you are allowed to offset but HMRC will not actually give you the money back. You used to be able to offset it against your tax bill in the UK but not anymore. We used to be able to offset it against our income from our UK rentals so we got a refund but all you can do now is carry the losses over so if in the future your income from your Spain property is more than your costs you can then offset your losses from previous years.
Hope that helps
Jan
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I might be wrong with this reply but,
I cannot see any references to paying taxes in Spain. I believe there should be 25% paid in tax on a rental income earned whether it be from holiday or long term lets, and that there are no allowances for mortgage payments, wear and tear etc?
I'm sure that if I am wrong someone will correct me.
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This is why I was asking a few questions, you are correct, any rental income obtained from a property in Spain should be declared in Spain with tax paid in Spain (24.75%) if you are a none resident, you also need to declare the income in the UK but no tax will be due (unless you are a higher rate taxpayer) as the tax rate in Spain is higher than the UK, There are allowances you can deduct in Spain but they must relate to the rental period, not sure of the circumstances of the OP so this may not apply , if the property is within a UK company for example
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I agree with Longlegpete, about the allowances only being allowed for the period let. However, you also need to think about your long let. Depending on when you signed the original contract, you cant terminate (unless they defaulting etc), your tenant is entitled to annual extension upto 5 years (if signed before June 2013) and 3 years after that date. You can only give notice for occupation by yourself. If you give that notice, and don't occupy yourself, within 3 months, then they're entitled to a new 5 or 3 year contract.
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Hello Longlegpete
Your information on tax in Spain is not quite correct. We have our 210 form done by a legal company out here and the below statement on tax on rentals is from them
Declaration on rental income is only necessary when it significantly exceeds your expenditure.
Properties that are rented for odd weeks of the year and only just cover the annual out goings for the year (water, electric, suma, community etc etc) do not need to be declared. The non resident tax covers the tax payment that is needed
You are incorrect in saying that you only have to declare it in the UK if you are a higher rate tax payer. You will need to do a self assesment form and declare it (there is a section on the form under the Uk property bit which says foreign rental properties) but there is no double taxation so you can offset any tax you have paid in Spain.
Jan
Jan
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Hi Jan
I would have to disagree, you need to pay tax on any profit made from a rental in Spain, you can only offset the part of the running costs that relates directly to the rental period, if you rent it out for 8 weeks in the summer then the IBI cost for that period only can be offset against the rental not the whole year, same goes for all other costs, with regards to La Renta tax you can only offset the 8 weeks that the property is let out.
You may have misread my post, I was saying you need to declare in both country’s with tax paid in Spain, this would mean you would only pay UK tax if you were a higher rate tax payer in UK, this may well also be negated by the fact that you can claim more in the UK than in Spain but this would depend on personal circumstances
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