Recently, we blogged about how a council tax loophole for second homes was about to be closed. Currently some second-home owners declare that their property is available for holidaymakers to rent, even though they fail to let it out. By these means they can avoid council tax and access small business rates relief. However, from April 2023, to get a property assessed for business rates, owners will need to prove that it will be available as self-catering accommodation for at least 140 days in the coming year, was available for 140 days in the previous year and actually let for 70 days in the previous year. Failure to do so means an owner will have to pay council tax. Now, depending on where the property is located, owners also face up to a 300% council tax increase on second homes.
A 300% council tax increase on second homes?
The new council tax increases have been announced by the Welsh Government. Wales is a popular location for second homes, which are owned by people from across the UK. However, the Welsh Government is worried that housing is unaffordable for local people in many areas of Wales. This problem has been exacerbated by the growth in demand for second homes during the COVID pandemic. Restrictions on foreign travel also fuelled a boom in ‘staycation’ properties.
Currently, Welsh councils can charge an extra 100% for council tax on second homes and long-term empty properties. From 2023, the maximum premium will rocket to 300%.
According to the Welsh Government, the average Council Tax rate for a Band D property is £1,731. With a 300% premium, that cost would soar to £6,924.
Will my property be affected?
If you don’t let out your second home as self-catering accommodation for the requisite number of days, then you will be liable for the council tax increase. However, it’s worth bearing in mind that the 300% premium is the maximum a local council can apply. Some councils may choose a lower premium.
What about a council tax increase elsewhere in the UK?
Even though the new increase applies only to properties in Wales, it doesn’t mean second homes elsewhere will remain immune from similar rises. Campaigners in Scotland are currently calling on the Scottish Government to follow suit. Again, the problem is a shortage of affordable housing in popular tourist destinations such as Skye, Harris and Arran.
While there are currently no plans to introduce a similar scheme in England, you can’t rule it out for the future. With serious housing shortages in popular holiday hotspots such as Cornwall, all eyes will be on Wales to see how effective the scheme will be.
Should I let out my holiday home?
Whether you want to let out your holiday home is up to you. If you are facing huge council tax increases, you may face a choice of letting it to tourists or selling up. However, running a holiday let business does take time, effort and investment. If you’re a THP client and you’d like some advice, have a chat with one of our accountants today.
- Related: Making Buy-to-Let More Profitable: a guide from the Accountants for Landlords.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.