We live in the UK and are buying a holiday home abroad. If we charge our friends a modest fee to use it, do we have to pay tax on the income?
For UK purposes, any income you receive from the property will be taxable. However, you will be able to offset some expenses against the income, including some of the interest on the loan used to purchase the property. It is possible that the allowable expenses will be more than the actual income you receive.
When you sell the property, any profit you make on the sale will be subject to capital gains tax. There are various reliefs available which will help reduce the amount payable.
You will also need to consider the tax position of the country where the property is situated.