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Buying a holiday home or a furnished holiday Letting on the Isle of WIght

29/4/2021

Sunset at Gurnard

If you want a second home/holiday home or a Furnished Holiday Letting on the Isle of Wight you'll need to consider a few things. This is certainly not a comprehensive list, it's more of a splurge of thoughts which might help guide someone in the right direction.

Most of this applies all over the UK but I'll throw in some local place names to keep it interesting.

Please note, I'm not an accountant and the bits which mention tax should be seen as a vague pointing in the right direction rather than up to date or water tight advice.

There are about 3000 second homes on the Isle of Wight according to a group called Action On Empty Homes. Other figures I've found suggest there are 71000 residential properties on the Isle of Wight so about 1 in 23 are second homes. So, second homes are fairly common on the Isle of Wight but it's not like parts of Cornwall such as Padstow which has a population which doubles during the summer.
There is divided opinion amongst permanent residents of the Isle of Wight about second home owners. It's hard to reach a consensus as comments sections on newspapers and on Facebook posts do have a habit of bringing out the world's more, ahem, opinionated people. However, you'll find most people on such forums tend to say one of these three things a) 'why shouldn't people buy second homes if they can afford to' or b) 'second homes don't contribute to the economy and community enough as they are often empty and don't always pay Council Tax' c) 'lots of second homes are used as holiday lets which bring tourists who spend money'. I'm not going to dare to attempt to reach a conclusion about how people feel with a pie chart to illustrate it, I'm just throwing the issue out for you to consider.
In case this needs saying, the Isle of Wight is an English county with the same rules about house purchases as the mainland. There aren't any rules that I'm aware of that restrict purchases to mainlanders. The only exception I've spotted has been around ownership of some beach huts which were only available to permanent residents. Those were in Gurnard, but the same rule might apply to other beach huts.
If you just use the property yourself, you will need to pay all the usual bills which include Council Tax, TV licence, gas, electric, insurance and so on. You can't claim back the cost of any spending, it's just like running another home. The rules around council tax are a bit complex but I would budget on the basis that you'll be paying the full amount as a second homeowner. This FAQ from Isle of Wight Council covers some discounts and exemptions and suggests that you might get a discount if your holiday home 'has a planning restriction preventing occupation at certain times of the year'. It just says to contact them though, there's no guarantee of a discount. Council tax rates vary depending on where the house is located, but as a rough guide, 2021 figures in Newport range from £1377 for Band A to £4132 for Band H.

A lot of the homes which are popular with second home owners are apartments in Cowes, Shanklin, Sandown, Ventnor and Ryde, as they often have sea views and are a bit easier to maintain than a freehold property. Most either have a lease of around 99-125 years or a 999 year lease. Of course, a property with only a few years left on its lease will start to lose value.
The key question with flats (and some houses) is how much will you pay for the annual ground charges, service charges or maintenance charges - and might they increase? At the lower end you'll find a charge of £500 per year but I've seen some Isle of Wight properties on holiday parks with a £10,000 a year service charge. In this case, I'd say you are basically renting it as well as paying a big chunk at the start. Typical service charge and ground rental figures for a two bedroom flat is more like £1500-4000 a year but it does vary and you'll need to include it in your budget. Some service charges seem to make sense - perhaps there's a swimming pool or gym which needs maintaining. But sometimes it's hard to figure out what the money is for, besides the freehold owner's designer watch collection.
If you plan to rent the house out as a furnished holiday home with occasional use by yourself then it's a completely different setup for tax as you are now running a business. It needs to be available and rented out for a certain number of days per year and then it's classed as a Furnished Holiday Letting (read the HMRC rules on minimum occupation to count as a FHL). You can then legitimately use it yourself for some other weeks and use the income to pay the bills. However, you'll need to pay a big chunk of your income to a property management company for cleaners, advertising, bookings etc. And you'll need a good one or it'll be an albatross round your next in no time. Of course, if you live on the Isle of Wight you might be able to do most of the legwork yourself but popping across on the ferry every Saturday to change the towels isn't likely to be a good business model.
if you want to rent out a holiday home rather than use it yourself, then it affects the type of mortgage you can get. According to GoCompare, 'Holiday home mortgages have a reputation for being difficult to arrange' and they are 'more of a niche product but they are readily available'.
If you are renting out a Furnished Holiday Let then you will pay business rates instead of Council Tax. However, some people manage to avoid paying both as they get small business rate relief. As you may have guessed, it's a little complicated but the gist of it is that if you own just one Furnished Holiday Home and it's relatively small then you are more likely to get small business rate relief than someone renting out a range of mansions across the Isle of Wight. The HMRC page you'll need to get your head around is this one on Business Rates Relief.
A Furnished Holiday Letting also allows you claim back some expenses and costs, as you are running a business. This forum post on the HMRC website is a good place to start. Which? reckon that a holiday let can earn 10-14% yield but the article admits that it's more like 6% in Dorset and the South Coast. My back of an envelope calculations of Isle of Wight properties struggle to get near to the 10-14% figures, particularly if you are paying someone to look after it, clean it etc. I'd be interested to hear some real life experience, if anyone fancies leaving a comment.

Of course, one downside of a Furnished Holiday Letting is that it's a bit like getting a new tenant every week so you can expect stuff to get well used and occasionally damaged.

As a second home owner, you would qualify for Wightlink's Multilink deal which gives you a good deal on the ferry. See this blog for more on that.
Finally, don't forget to budget for insurance. The type of home insurance you'll need will vary depending on how the property is used, such as whether it is unoccupied for big chunks of time. Also, check that the property you've got in mind is insurable. Some coastal parts of the Isle of Wight have suffered landslides and road closures over the years due to cracks appearing.

As I said, this isn't intended to be a checklist for a second home but hopefully it will be of use to someone who is exploring their options.

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Yes, Isle of Wight residents can get cheaper ferry fares (with a bit of effort)

20/4/2021

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Before we get into the meat of this Solent-sandwich let's make it clear that there isn't currently a simple fixed price discount which every Isle of Wight resident receives on every vehicle crossing on the Isle of Wight ferries. You can’t just turn up at the ferry, shout a secret phrase ("alright nipper!") and help yourself to a £50 return journey without any effort or commitment.

However, with a bit of investment, faffing or forward planning then most people can make some good savings on the ferry if they're an Isle of Wight resident.

This blog post will focus on car ferry travel but there are deals for Isle of Wight foot passengers such as My Link and the Blue Card.

Anyway, let’s start with Wightlink car ferry travel.

If you’re an Isle of Wight resident or a second homeowner then you are entitled to buy a Wightlink Multilink pass.

The idea is that you buy a book of ten crossings for a car and passengers. At the time of writing, it costs £290, so a return journey is £58 regardless of when you travel or how many passengers you have. During the peak of summer that will probably save you more than £100 per crossing.

As far as I can tell, each ferry crossing has a number of spaces reserved for Multilink passes so you need to book early if you’re planning to use the ferry on a Saturday lunchtime in August.

There are some key bits of smallprint – some of which make it more appealing and some of which make it less appealing.

The main downside is that you need to use the journeys within one year of topping up. You may conclude that since you only manage two or three return journeys with a car each year, that it’s not worth it.

But wait, dear reader!

There are a couple of bits of juicy smallprint which will make your heart race.

Firstly, you can share a Wightlink Multilink pass with someone else who lives at the same address and you don’t have to be the driver. They aren’t tied to one vehicle, so a parent could share a pass with a son or daughter who is away at university.

Secondly, if you don’t use all your journeys within one year you can carry over spare credit by topping up another five journeys. This works well if you have a year of minimal travelling followed by a year of more regular journeys.

Thirdly, if you decide you don’t need your pass anymore and it has credit left, you can apply to get 75% of the cost back. There are some bits of smallprint to abide by but it’s not too complicated and it means that you’ll stil get a good price if you only use three or four crossings and then cancel the pass.

Let’s move on to Red Funnel, which takes a completely different approach.

Their travel deals for regular car ferry travellers are available to Islanders and Mainlanders (20% off if you prepay £1000). However, they do send out something called the Red Funnel Big Book of Savings to Isle of Wight residents (71,000 homes apparently.

They are sent out five times a year and offer special deals and discounts for residents. You can use the discount codes a limited number of times (usually three times) which is why we don’t share them on this website.

The deals either offer a fixed price or a percentage discount. As you’ll see from this marketing website the deals can be pretty good – during 2020 they offered 25% off vehicle ferry crossings or Red Funnel car ferry day returns for about £40.

The upside with these deals is that they will sometimes trump the Wightlink Multilink price and there’s no commitment or upfront payment.

The downside is that they are usually designed to steer customers towards lower demand sailings, whereas the Wightlink deal potentially lets you travel any time. You can’t rely on these discounts if you’re planning a trip to the mainland long in advance.

Besides those deals from Wightlink and Red Funnel, there are also generous discounts for Isle of Wight residents who have low incomes.

To qualify, you need to either be receiving ‘Local Council Tax support’ or housing benefit. This council page announcing the scheme back in 2018 reckons there are about 14,000 eligible people.

Once you’ve applied for the scheme, you can get Red Funnel return car ferry travel for a maximum price of £51, at the time of writing. They call it the Assisted Fares Scheme. Wightlink also offer a discount under the name of the Discounted Fares Scheme although I couldn’t see prices.

There are also foot passenger discounts for people on low incomes from Red Funnel, Wightlink and Hovertravel which is somewhere around half price. Hovertravel call it the IOW Council Affordable Fares Scheme.

Finally, it’s worth mentioning that there are schemes in place for Isle of Wight residents who are visiting hospitals on the mainland.

At the time of typing, you get a 50% discount with Wightlink if you're going for an NHS appointment. Red Funnel do a fixed price hospital trip deal whilst Hovertravel offer discounts to foot passengers under their Hovercare scheme.

If anyone knows of other discounts and deals which are exclusively for Isle of Wight residents, please add a comment below. We cover all the deals and offers that we know of in our ferry discounts guide.

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