Under current rules, if you own a second home and declare an intention to let the property out to holidaymakers, you may be able not to pay council tax on that second home but to have the property assessed for business rates instead. You can then potentially access small business rates relief on the rateable value of that property. A press release from the government released on 14 January said that, "concerns have been raised that many never actually let their homes and leave them empty and are therefore unfairly benefiting from the tax break."
The proposals, announced by the Department for Levelling Up, Housing and Communities on the 14th January, will not be removing the ability to be assessed for business rates and access small business rates relief on your second home entirely, but instead bringing in criteria that must be met. From April 2023, these will be proving:
- that the property is let for a minimum of 70 days a year; and
- that the property is available to rent for 140 days a year.
These changes may affect how some people use and purchase second properties. If you only rent your property out for part of the year currently, but do so for less than 140 days per year, you will need to increase this amount under the proposals to retain access to the reliefs, even if you meet the other 70-day occupancy threshold. This may be a consideration if you are planning to purchase a second home as you may become less able to use it when you would like.
Moreover, it may not be as simple as only offering it for rent for 140 days in the off-peak season as you will need to reach the 70 days of occupancy threshold which will arguably be harder at that time in some locations. There appears to be no allowance if property owners legitimately try to let the properties but the market conditions make it impossible to meet the 70-day threshold.
These new regulations will not come in until April next year, so people affected have some time to adjust how their properties are used accordingly.
The Government press release is available here: https://www.gov.uk/government/news/gove-closes-tax-loophole-on-second-homes