Changes to the pension system, which have come in to effect this year, are widely considered to be the most radical in almost a century. Greater freedom and flexibility to access pension funds from age 55 enables those approaching retirement to consider a much wider array of investment opportunities. What’s more, new limitations on the amount which can be put into in a pension under the lifetime allowance limit without suffering tax penalties is leading many investors to consider property as a more attractive option.
Property the safest form of investment
Property continues to be among the safest form of investment for anyone looking to future-proof their finances. Holiday cottage company, Welcome Cottages, is helping property owners considering investing in an additional premises understand the many financial and practical benefits of utilising the opportunity to start a holiday let business and maximise their all-important return.
Tony Briscoe offers this advice to potential holiday home owners:
“Individuals now have choices as to when and how much of their pension fund they wish to cash in upon retirement, with 25% of the fund value taken entirely tax free. The choice is theirs as to whether they will be looking to invest their capital to produce further income streams or spend it.
“Property investment could feature as part of future revenue and tax planning and has generally been proved to be sound in the long term. With potential growth in value, property prices in the main keep ahead of inflation and offer better returns than is achievable on other types of investment such as bank deposits – although of course this is not guaranteed.
“Letting investment properties as furnished holiday accommodation can have great tax benefits over a residential let, although it is a complicated area so as ever with this kind of thing, you should get specialist advice. In order to classify as a holiday let the property must be let for at least 105 days a year, and must be available to let at least 210 days a year. But assuming you meet criteria, expenditure on all operating expenses, such as rates, water, electricity, insurance, maintenance, advertising, cleaning, welcome packs and even mortgage interest are tax deductible.
“In contrast to a residential let, a holiday let owner can claim capital allowances on capital expenditure used to set up the property (not on the property purchase itself, however) – so this could include furniture, heating/electrical work, plant equipment and so on. Remember you will also be able to claim Small Business Relief on rates.
“The right property in a good location can give substantially higher returns than would be possible if let on a tenanted basis. Importantly, you also retain right of access and control over your property as holidays are short in duration,” he said.
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