‘Tax loophole’ on second homes to close from April 2023

The government recently announced they are to close the ‘tax loophole’ which allows some owners of second homes to escape business rates and council tax.

According to the government, the changes will target homeowners who leave properties empty whilst claiming they are a holiday let. The current rules allow owners of second homes in England to escape paying council tax and access small business rates relief by declaring an intention to let their property out to holidaymakers. Second homeowners can benefit from these tax breaks even if they never actually let their home.

These new rules could impact owners of genuine holiday lets as they will now be required to meet strict letting criteria to qualify for the business rates relief.

What are the new rules?

Under the new rules, which are due to take effect from April 2023, a property will be assessed for small business rates relief, rather than council tax, if the owner can provide evidence that:

  • It will be available for letting commercially, as self-catering accommodation, for short periods totalling 140 days in the year;
  • During the previous year, it was available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days; and
  • During the previous year, it was actually let commercially, as self-catering accommodation, for short periods totalling at least 70 days.

The government has confirmed that they will accept evidence such as the website/brochure used to advertise the property, letting details and receipts.

Newly let properties

It is important to note that there will be no change to the rules for newly available holiday lets – these will be liable for council tax for each day until the property has been available for 140 days and let out for 70 days. On the day that these two criteria are met – the property will qualify for a business rates assessment.

Get in touch

If you have a holiday let and are unsure of what the new rules mean for you or would like to discuss your specific situation in more detail, get in touch with Jonathan Cunningham by clicking the button below.

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