Holiday lets hit as tax relief is withdrawn

Britain's holiday homes could be in short supply and more expensive to rent as owners are set to lose out on an existing tax perk.

The sneaky tax grab was hidden in the small print of the Budget announcement, which will see owners unable to claim tax relief after this year.

Previously those who owned and rented out a second property, including static caravans or park homes, were able to offset losses against other tax bills, which made renting out a second property an attractive prospect and reliable source of income.

However from April 6 2010 holiday home owners will lose this benefit, potentially leading to a decline in accommodation available resulting in higher rental charges.

Experts are worried about the impact this will have on the economy in holiday areas such as the South West of England where at least 20,000 beds will be affected.

"We could see a dramatic reduction in the volume of self-catering accommodation available, resulting in far fewer people holidaying in the south-west," said Alan Taylor, of holiday rental company Blue Chip Vacations.

Under the current rules for homeowners to qualify for a tax break, a second home must be furnished, available to the public for at least 140 days, rented for at least 70 days and not occupied by the same person for more than 31 consecutive days.

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Some second property owners are set to benefit though, at least in the short term. Previously the tax relief only applied to UK lets. Now to comply with EU legislation the treatment is to be extended to include all second homes within the European Economic Area.

Overseas holiday home owners will also be able to offset losses from the tax year 2008/09 in addition to this year until April, when it will be abolished for everyone.