New tax rules on holiday lets – What does it mean for owners?
It was recently announced that the Government would reform business rates relief for owners of second homes – resulting in some holiday let owners facing additional costs of up to £1,000 a year.
The Department for Housing, Communities and Local Government wants to close what it sees as a loophole in the current business rates system that prevents some second homeowners from paying council tax.
Michael Gove, Secretary of State for Housing, Communities and Local Government, confirmed that new rules next year will only allow second homeowners to register for business rates relief if they can prove they rent out their properties for at least 70 days per year.
What exactly is changing?
As the rules stand, second homeowners pay business rates, which are cheaper than council tax, if they make their property available for letting for 140 days in the coming year.
But once the change takes place in April next year, homeowners will have to prove they are let for at least 70 days a year or be forced to pay council tax instead.
Is the change necessary?
The move comes following a surge in the number of holiday lets in England, with around 65,000 residential units currently registered, up from 50,960 in 2019.
The Department for Levelling Up, Housing and Communities (DLUHC) also says that there is currently ‘no requirement’ to produce evidence that a second home has been let out – not just left empty.
The DLUHC says the move would protect ‘genuine’ small holiday letting businesses and ensure second-home owners paid a ‘fair’ contribution towards public services.
Mr Gove’s plans come after a consultation launched in 2018 and threats last year by the Treasury to close the loophole.
According to reports, the number of holiday lets in England has been increasing year on year from 50,960 in 2019 to 65,000 now.
The COVID pandemic is said to have fuelled the trend, as London and other city dwellers sought to escape to the countryside.