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Second Homes & Holiday Lets Tax, Licensing & Business Rates Rules

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Latest news and changes

The council tax, business rates and licencing rules for second homes and holiday lets are evolving. This is due to the Governments concerns that the rise in second homes and holiday lets in rural communities is leading to a shortage of affordable housing for locals.

We will update this page with the latest changes to the rules.

England news

Holiday lets register for England

The government is looking to set up a holiday lets register for England, amid concerns that the rise in second homes and holiday lets in rural communities is leading to a shortage of affordable housing for locals.

MPs urged the Government to adopt measures including limiting the number of second homes in communities by changing planning laws and doubling council tax in some of the worst affected areas.

Government launches review into short-term tourist accommodation

The review into the effect of short-term holiday lets will seek to improve the holiday letting market for those living in popular tourism destinations.

The Government is considering include a registration ‘kitemark’ scheme with spot checks for compliance with rules on issues such as gas safety, a self-certification scheme for hosts to register with before they can operate, and better information or a single source of guidance setting out the legal requirements for providers.

For further information visit https://www.gov.uk/government/news/government-launches-review-into-short-term-tourist-accommodation
The call for evidence https://www.gov.uk/government/consultations/developing-a-tourist-accommodation-registration-scheme-in-england/developing-a-tourist-accommodation-registration-scheme-in-england-call-for-evidence

Second homeowners in North Yorkshire to pay double council tax

The proposed rise is due to start on 1 April 2024 but in exceptional circumstances residents would be able to claim a council tax reduction. Currently council tax for a band D property in Whitby is £2,116 for the 22/23 year but under the new policy that would double to £4,232.

Wales news

New tax rules for second homes in Wales

The Welsh Government has announced an increase to the maximum level of council tax for second homes, as well as changes to the business rates criteria.

Second home owners face a potential 300% council tax rise

The Welsh government has declared it is increasing the maximum level that local authorities can set council tax on second homes. Currently, the maximum premium councils can charge is 100 per cent – so the new policy constitutes a possible tax rise of 200 per cent.

Business rates criteria changes

The criteria for self-catering holiday lets in Wales qualifying for business rates rather than council tax will also change from next year.

Currently, properties available to let for a minimum of 140 days in any 12-month period, and actually let for at least 70 days, pay business rates rather than council tax. But from April 2023, properties must be available to let for at least 252 days and actually let for at least 182 days in any 12-month period to qualify. If you cannot meet these thresholds, then you will be required to revert to paying Council Tax.

Tourism leaders in Wales say these new letting requirements will frankly be impossible for many self-caterers to meet and will decimate the Welsh tourism industry.

For further information visit the Welsh Government website: https://gov.wales/new-tax-rules-second-homes

Welsh councils to get powers to control numbers of second homes and holiday lets

-Councils will be able to control numbers of second homes and holiday lets under new Welsh government plans.
-Local authorities will also be able to make amendments to the planning system, requiring planning permission for change of use from a primary home, second home and short-term holiday accommodation.
-Work will also begin on allowing councils to apply increased Land Transaction Tax (LTT) on the purchase of second homes and holiday lets.
-A new licensing scheme for people who want to operate short-term holiday lets, such as Airbnb, is also planned.

For further information visit the Welsh Government website: https://gov.wales/new-package-measures-address-high-numbers-second-homes

Scotland news

New licensing laws for short term lets in Scotland

The Scottish government has introduced a licensing scheme for Airbnb owners and short-term holiday let landlords across Scotland. The purpose of the licensing scheme is to ensure short-term lets are safe and address issues faced by neighbours.

Existing short-term let hosts (operating before 1 October 2022) will have to apply for a licence before 1 April 2023.

New operators of short-term lets (where no bookings have been made prior to 1 October 2022) will have to have a licence before taking any bookings.

For further information visit https://www.visitscotland.org/supporting-your-business/advice/short-term-lets-legislation

 


Wooden cubes with the word Tax on coins

A guide to holiday let business rates & council tax

Whether you use your second home for holidays or rent it out to paying guests as a holiday let, you will need to pay either council tax or holiday let business rates. To help you understand the difference between the two, and which you qualify for, we’ve answered the most frequently asked questions in this guide.

What’s the difference between holiday let business rates and council tax?

Holiday home council tax

Council tax is an annual fee that your local council charges for the services it provides in the area.

If your holiday home is mainly used by yourself, family and friends for holidays or is let out for less than 20 weeks per year, it will qualify to pay council tax.

The amount of council tax you pay depends on the value of your home and its location. You can check your holiday home council tax band and the amount of tax you have to pay here: https://www.gov.uk/council-tax-bands.

Holiday let business rates

Holiday let business rates are a tax levied on properties that are let commercially. Similar to council tax, they are used to help pay for local services. If you are letting your holiday cottage commercially, rather than just for your own use, it is likely that you will be subject to paying business rates rather than council tax.

To qualify for business rates in England rather than council tax, your property must be classified by HMRC as a Furnished Holiday Let, rented out for a minimum of 70 days and be available to let short-term for at least 140 days a year.

If the owner cannot provide proof, they won’t be allowed to switch to business rates and will pay council tax.

How to calculate your holiday let business rate

You can calculate your holiday let business rate by using the rateable value (which is calculated by the Valuation Office Agency) based on the rental value of the property and then use the business multiplier set by the government.

If your holiday let is located in England or Wales, the Government has an online tool you can use.

There is a different way to work out business rates for your property if it’s based in Scotland or Northern Ireland.

What are the benefits of paying business rates rather than council tax?

If your holiday home qualifies as a furnished holiday let, it is classed as a business and there are various benefits available.

What qualifies as a ‘furnished holiday let’?

Your property will need to meet the following conditions:

  • The holiday home is fully furnished
  • The property is based in the UK or the European Economic Area (EEA)
  • It is available for commercial, short-term lets for 210 days (30 weeks) per year
  • The holiday let is let out for at least 105 days (15 weeks) of the 210 days you have made it available
  • If your holiday let is rented out by the same person for more than 31 days, there shouldn’t be more than 155 days of this type of ‘long term’ let per year.

If you qualify as a furnished holiday let, you need to register with your local council for business rates.

You can visit the HMRC website for more information.

What is small business rates relief?

If your furnished holiday let property’s rateable value is less than £15,000, you may be eligible for small business rates relief which will reduce the amount of tax you will have to pay. If your property has a rateable value of £12,000 or less, you won’t have to pay any business rates. If, however, your holiday let property’s rateable value is between £12,001 and £15,000, the amount of tax relief you receive will go down gradually from 100% to 0%.

If your holiday let is based in Scotland or Wales, you should note that the tax relief works differently .

In Wales, you should qualify for Small Business Relief if the rateable value is below £12,000, and no business rates would be payable at all if its value is under £6,000.

In Scotland, if your property’s rateable value is below £18,000, you may be able to claim this tax benefit. And in the event its value is below £15,000, you might not have to pay any business rate levy at all.

To apply for small business rates relief, you will need to contact your local council.

Note that business rates are classified as an expense and can be deducted for tax purposes.

Is it cheaper to pay council tax or business rates on my holiday home?

The common consensus is that business rates can often work out cheaper than council tax. As outlined above, there are also certain furnished holiday let tax reliefs that you can benefit from.

It should be noted though that if you don’t pay council tax, your local authority will stop collecting your rubbish and recycling, so you will need to organise and pay for private waste collection.

*At the time of writing (July 2022), we’ve taken all reasonable care to make sure that the information in this article is as up-to-date and accurate as possible.

4 Comments

  • Vikki |

    The changes to the Welsh legislation are still uncertain, please find the latest information from PASC UK who are acting on behalf of us in Wales to make the government realise the difference between 2nd homes and genuine businesses. Living rurally with few amenities nearby and almost certainly tourist places being shut through some of autumn and all of winter will make it impossible to obtain the full 182 days. Only 16% of businesses think they will be able to make this achievable and many – like us – will have to consider if we can continue where we will be working at a loss making business unviable. We do not have 6 months of seasons in Wales (perhaps in certain places) but not many want to visit in the freezing cold temperatures, the wind and rain (and mud!). Even being with one of the biggest agencies in the country only gave us 160 nights and that was beyond what they thought we might achieve. Just because someone is not physically staying in the cottage does not mean we are not still working – cleaning, maintenance, marketing etc.

    • Philip |

      Hi Vikki, thanks for you input. I agree, the 182 days will be hard to achieve and hopefully it will be reduced. Here is a link to the PASC https://www.pascuk.co.uk/reports/

  • JohnC Algar |

    I fought against the proposals for a “Second Home” tax the first time around, as I did again when Welsh Government and Swansea Council asked for comments in 2019 thru 2021, but it would appear that all suggestions as to having “tiers” of Council Tax to be paid by property owners and what they “do” with their properties, doesn’t accord with those in power.

    Whether in Scotland, Northern Ireland, England or Wales, the “problem” is the lack of housing; more particularly that of “affordable” housing, so we, the Second Home owners who pay Council Tax are being penalised along with Second Home owners who are registered for Business Rates, whether we are able to achieve those 182/252 day figures – or not.

    It would be interesting to know whether Scotland, N.Ireland and England – when considering the new Taxation on Second Homes – consulted their Tourism Ministers as to the affect such Taxation and figured would have, especially when one considers the £millions generated each year for each Country’s economy. That Wales neither has a Tourism Minister, and that no-one from their Tourism board was (knowingly) consulted before WG made its decision, means – at least to me – that WG was biased in what it determined, and as such, WG should be challenged – the only problem being that Wales does NOT have a dedicated body acting for all Second Homes that are Holiday Accommodation Businesses (ok, so there is OASC and many others including local Tourism bodies, but they don’t represent the majority)!

    Two comments I must make, are that Schofield’s have been wonderful to and for the Holiday Home Industry over many years,vand I hope and trust will ztil be out there, in front, but the other item is that here in Swansea, our Council Tax had already been increased BY 100% in 2021,, whilst in 2023 it will be increased by 300% over the standard Council Tax – so 400% to pay next year, and not 300% !!

    • Philip |

      Thanks for your comment John. PASC (https://www.pascuk.co.uk/) are doing some great lobbying work on behalf of owners, but I agree, there’s not enough support for owners.

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