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Financial administration for holiday lets

Financial administration is very much the business side of running a holiday let. As with all other areas of finance, how you set it up, manage it and stay on top of it is vital for the success and sustainability of your holiday let business. 

HolidayHost provides its clients with the solution for financial administration, and can also offer advice to point you in the right direction when it comes to other areas of finance in relation to your property.

Financial administration tasks undertaken by HolidayHost

This is one of the most helpful elements of the HolidayHost service. 

  • When the money from a booking is made for your property, on one of the online travel agent (OTA) sites such as VRBO or Airbnb, it arrives in your dedicated client account at HolidayHost (minus the 3%+VAT OTA fee) - the ‘OTA Payout’.
  • These payments are then matched with the relevant guest’s name and booking by the HolidayHost service to make them easily associable (OTAs do not allocate income according to the bookings, which can make payments difficult to track). 
  • The value of the booking, by the guest, is then visible to you via our bespoke Dashboard. 
  • Once the money is in your dedicated account, we pay any direct costs that you have asked us to handle, such as changeover housekeeping and laundry, and again make these clearly visible to you on the portal, where you can download your 3rd party bills - the ‘3rd party deductions’.
  • We raise our 8-9% fee at the end of every calendar month - the ‘HolidayHost deduction’.
  • The NET amount after deductions, is then paid to our holiday home owners.

We understand that owners often like to be able to forecast income in order to budget in advance for items such as mortgages, school fees or their own holidays. For this reason, we designed our portal to have other additional financial administration tools, including a revenue chart, which presents the amount of projected revenue before costs by calendar month for the next 12 months. We can also provide additional reports for holiday home owners’ accounting purposes

Financial tasks that on which HolidayHost can advise: 

There are other areas of finance that holiday home owners do need to take into consideration when letting their home. While we do not manage these, we are able to apply our expertise to help owners improve their profits and ensure there are no surprises down the line. You should be aware that this is purely advice based on our experience and in these matters we would still recommend that you speak to a professional financial advisor.

  • Council tax and business rates: If you are making your holiday home available for holiday letting for more than 19 weeks (140 days) of the year then it should be registered with the local authority as a business, which will require business rates  property tax rather than council tax to be paid.
  • Funding availability: In some instances, there are grants and funding available for specific property maintenance and improvements tasks, and it’s worth being aware of them. For example, investing in green energy can help attract prospective guests whilst also improving your property’s profitability and of course, helping to do your bit for our environment.
  • Efficiencies: It’s not just the money that comes in that contributes towards the profitability and sustainable running of your holiday let. The money that doesn’t go out can also play an important role. For example, being aware of efficiency improvements such as smart energy systems can help you keep costs down when your holiday home is empty, but turn the heating on if cold weather is setting in to prevent pipes freezing. 
  • Sinking funds: On any property there is wear and tear each year, whether it’s as a result of daily comings and goings, the ongoing maintenance of a property or even the weather. For this reason, we recommend putting together a sinking fund for your holiday home, to limit the likelihood of any financial surprises. When setting up your holiday home, take into consideration ongoing costs of running a holiday home, such as window cleaning, housekeeping and gardening; annual costs such as pressure washing the patio and maintenance; and put some cash aside for the unexpected, such as broken boilers or storm damage. Also remember that with the best will in the world, things like glasses and plates do get broken, so consider this within your ‘fund’. If the fund is spent you will have avoided any surprises, and if it doesn’t get spent then you remain cash positive!
  • Income tax: When it comes to income tax, you have to pay Class 2 National Insurance if your profits are £6,515 a year or more and what you do counts as running a business.  Any income from a holiday let is subject to income tax and will have to be declared on your annual tax return. 
  • VAT: Your property income may become eligible for VAT. Holiday lets are charged at the standard VAT rate of 20% (5% currently as a result of Covid-19 government support measures) if it breaks the VAT registration threshold, which is currently £85,000 in any 12 month period. 

Marketing tasks that require financial expertise

There are certain financial management points for your holiday home that have a direct impact on its marketability, so it’s important to get them right. Two key areas for this are price pointing and deposits, we play a significant role in supporting holiday home owners in both. 

Pricing your holiday let: Pricing your holiday let includes a combination of factors. The OTA commission and HolidayHost fee need to be taken into consideration, as do the running costs of your property. In addition however, the local market, inflation, seasonality and less tangible elements such as public mood need to be reflected in the listed fees. Pricing is also impacted by the quality of your holiday let listing from its imagery to its photography. That’s why we work with you on all aspects of setting it up in order to make sure these elements are all in line with one another. At HolidayHost we don’t set prices more than 12 months in advance because the demand for holidays changes, and it’s vital that owners’ pricing strategies reflect  that feeling in a timely manner. 

Deposits for your holiday home: One of the most frequently asked questions from holiday home owners is about what happens if something gets damaged in their holiday homes when guests stay over and beyond natural wear and tear, and this is where deposits come in. Some letting agencies have eschewed the traditional concept of a deposit believing that it can put clients off booking. However, we have not seen evidence of this trend, and we see our job as protecting you and your interests as the Owner. Therefore, we always require guests to pay damage deposits. Our interest is in protecting your asset, securing your future income whilst also maximising profit on each booking. 

If you would like to find out more about how HolidayHost supports holiday home owners when it comes to financial administration, contact the team any time.

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