60 1GM Saturday September 5 2020 | the times
Money
Tech sell-off
causes jitters
Continued from page 59
because they simply follow the index,
upwards or downwards. You could pay
more for an actively managed fund.
Hollands suggests the Conventum Lyr-
ical fund. This has over 21 per cent in
tech but does not hold any of the mega
companies that led the recent surge.
Instead it holds the PC giant Dell Tech-
nologies and electronics distributors
such as Synnex. However, the fund is
very expensive at 1.44 per cent a year.
0 Will the fall in tech continue?
Miah at The Share Centre does not
think so. “I am inclined to think that
this is just a modest and healthy adjust-
ment,” he said. However, the sector
does face headwinds. Hollands said:
“Do not be surprised if we start to see
increased talk of greater scrutiny of big
tech, calls for new taxes on them, or
demands for a break-up of the giants”.
0 Don’t try to time the markets
Investors may want to follow the herd,
but this is not advised. The best advice
is to drip feed into the market, take
more risk if you have a long investment
horizon, and keep costs down.
Buy-to-let is
over: invest
in a holiday
home instead
T
he Treasury has radically
pruned the tax breaks
you can get on most
mainstream investments,
but there is still one branchthat is yet to be snipped — holiday
homes. Which other type of money-
making venture lets you potentially
avoid the accounting holy trinity of
income tax, capital gains tax and
inheritance tax?
My pre-holiday preparations this
year involved lots of time wishing that
I owned a holiday home. The longing
started when I found nothing in the
UK available at medium-term notice,
and intensified when I spent evening
after evening looking at forlorn-
looking gîtes in northern France to
rent for eye-watering amounts.
Life as a UK holiday home owner
had never looked so sweet as it did in
the run-up to my holiday last week.
We were lucky in the end, and
stayed with good friends with the
best behaved children in the world in
their amazing newly purchased
holiday home in Devon.
While spending the week with a
couple who had opted for a holiday
home investment rather than a buy-
to-let, I asked why they made this
choice. And the reply was simple: tax.
With buy-to-let the deductions are
minimal. You can take some running
costs from profits but for the biggest
cost — loan interest — you only get
relief on 20 per cent of your mortgage
interest payments. That’s it.
The perks of a holiday home,
however, are bountiful. You can claim
all costs, including cleaning, letting
agent fees and mortgage interest
against your profits to reduce
income tax. If you buy a home
and do it up —
installing a new
kitchen, or heating
system — all these costs can be
claimed back too. Your earnings can
be put into your pension and
entrepreneurs relief could be claimed
to reduce capital gains tax to 10 per
cent (assuming that the owner hasn’t
used up their £1 million lifetime
allowance). And if you sell to buy
another holiday home within three
years, or you give it to someone else,
you can defer the capital gains tax
until you sell the new home (or the
person you give it to dies).
The icing on the cake is that if you
provide hotel-like services for your
residents — hire of equipment,
laundry services, booking of activities
— your loved ones won’t pay
inheritance tax on the property if you
die thanks to business property relief.
Heather Powell from Blick
Rothenberg, an accountancy firm,
said that some clients are opting to
convert their buy-to-let properties
to holiday lets. Location is irrelevant
when looking at whether it will be
considered a holiday home for tax
purposes, but it must be available for
210 days a year, and be let for at least
105 days, with no lettings over 31 days.
This means your city-centre buy to let
could be transformed to a more tax-efficient furnished holiday let.
The difficulties of travelling
overseas and a longing for a bolthole
while in lockdown have led
many people to think more seriously
about a holiday home, especially with
stamp duty reduction on properties
up to £500,000 until the end of
March.
Getting a mortgage isn’t as hard as
it used to be, although having a
25 per cent deposit is normal for this
type of loan. Most lenders will want to
see that the holiday home rent can
cover 145 per cent of the interest. If it
doesn’t, loans are usually capped at
3.5 times your income.
The big potential cloud on the
horizon for holiday home owners
is if the tax perks are taken away,
which as landlords know can happen
suddenly, making your property
unprofitable almost overnight.
Walking down the streets of Devon,
and along the beachfront though;
seeing the ice cream shops, the cafés,
the letting agencies, clothes shops
that are selling to tourists mainly, I
thought it was unlikely that the
government would get its shears out
— not at the moment anyway.
Looking at the accounts of just one
letting agency in the area, which
made £1.25 million in one year, I
became even more convinced that
Rishi Sunak will not snip this income
revenue from local communities in
difficult economic times.
So being a holiday home owner is
likely to be a favoured investment for
years, and with every new overseas
Covid-19 travel restriction that is
introduced, the prospect seems
more enticing.Home
Economics
Jessie
Hewitson
Deputy Money Editor
St Ives in Cornwall is one of the hot
destinations for holiday-home buyersReturn of the borrowers
Household borrowing hit £1.2 billion
in July after four months when
consumers paid back more than they
borrowed. The Bank of England said
the total was above the £1.1 billion
monthly average for the 18 months
to February.Tax charge deadline
Taxpayers threatened with the
taxman’s controversial loan charge
have one month to settle their debts.
The charge was applied to so-called
disguised remuneration schemes,
under which agency workers and
contractors were paid a portion of
their salary in tax-free loans. The
taxman says that those who it
believes owe back taxes have until
September 30 to negotiate a
settlement or pay the charge in full.10p charge for bags
The fee for plastic carrier bags will
double to 10p in England from April.
The charge will also be extended to
smaller shops. Retailers that employ
250 people or fewer are exempt from
the levy at the moment. A public
consultation last year found that most
respondents welcomed the changes.
All shops, including small retailers, in
Scotland, Wales and Northern Ireland
charge 5p for plastic bags. The charge
was introduced in England in 2015.
Almost all retailers give the charge to
good causes with about £58 million
donated in 2017-18.Rent rises outside London
The average rent is now £985, up
2.1 per cent on July and 1.5 per cent
higher than August last year,
according to the Homelet rental
index. The South West went up the
most — 5.5 per cent in a year to £899.
London was the only region to fall,
with average rents down 2.1 per cent.did you know?
The largest business
in the UK, the British-
Dutch company Unilever,
whose brands include
Hellmann’s, Marmite,
Persil and Vaseline,
makes an average profit
of £14.6 million every day
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Investors test their metal
Private investors have poured
£353 million into precious metals over
the past six months using the online
marketplace Bullion Vault. The
company, based in London, has
enjoyed a sharp rise in demand since
coronavirus was declared a global
pandemic in March. In August gold,
which is perceived as a safe haven in
turbulent times, reached the record
price of $2,069 per troy ounce, while
silver is up nearly a third from July to
today — its fastest rise since 1987.
Platinum prices have gone up for a
fourth month running.