Property Tax – Second home loophole to end in April 2023


Starting in April 2023 many second homeowners will not qualify to pay business rates rather than council tax. However, the good news is that if they can demonstrate that their properties are rented out as a self-catering holiday let for at least 70 days a year then they can still qualify to pay business rates.

Presently, second homeowners can advertise their properties for rental to holidaymakers for 140 days per year to avoid paying council tax even if it is never let out. This is because you do not need to provide evidence that the property has been commercially let out. Although they are subject to business rates, then under the small business rate relief as long as the property has a rateable value of less than £12,000 then the property’s business rates liability is zero.

This ‘loophole’ has been criticised for a number of years, particularly in regions such as the Lake District, the West Country, and rural Suffolk. Government data shows that there are 65,000-holiday lets in the UK. Around 97% of these have rateable values of up to £12,000. Subsequently, it is highly likely that many second homeowners are taking advantage of this ‘loophole’.

It was announced in 2018 that the Department for Levelling Up, Housing & Communities had launched a consultation into limiting the opportunities for second homeowners to declare their property as holiday accommodation and subsequently qualify for small business rate relief. However, due to the global pandemic and change in government administration, it was not announced until 23rd March 2021 (Tax Day) that a tightening of the holiday let rules would be implemented in England (subject to consultation).

The new rules were published this month which will take effect from April 2023. The new rules state that a property will be assessed for business rates only, and not council tax, if the owner of the second home can provide the Valuation Office Agency with evidence that:

The property will be available for commercial letting as self-catering accommodation, for short periods amounting to at least 140 days in the coming year.
In the previous year, it was available for commercial letting as self-catering accommodation, for short periods totalling at least 140 days. Plus, it was let commercially, as self-catering accommodation, for short periods amounting to at least 70 days.

So this change could have a significant impact on individuals who own second properties which are not commercially let out.

How can we help?
At Hawsons we have a dedicated team of property and construction accountants at our offices in Sheffield, Doncaster, and Northampton.

Hawsons has a dedicated team of specialist property and construction accountants in Sheffield, Doncaster and Northampton.

We act for a large number of property and construction firms across all three of our offices, including:

Construction firms
Estate agents
Having an accountant who understands the challenges of this dynamic sector and is able to help you plan for the future is an advantage in a competitive environment. At Hawsons we have a great deal of experience in advising and helping businesses in property and construction and we can assist you as your business grows.

Our in-house tax team have advised in many aspects of taxation specific to the property investor including in the areas of VAT, Capital Allowances, Income, and Corporation Tax and Capital Taxes.