Last Updated on November 9, 2018 by Mark Lavington
Plans to double council tax on holiday homes
October brings with it the political party conference season. A time when each party comes together in order to flesh out their major policies. Holiday homeowners reading some of the headlines which emerged from the Party Conferences recently, the reading may seem quite bleak.
The reason? When shadow housing secretary John Healey took to the stage he announced that he was ready to place a brake on the growing difference between Britain’s housing ‘haves’ and ‘have-nots’ in order to tackle homelessness that “shames us all”.
The focus of much of his ire was the country’s second home owners. Those owning a holiday cottage or second residence potentially being targeted for an additional £560 million tax bill – a doubling of their council tax.
Whilst potentially alarming for cottage owners, a question to be asked here is whether or not you are currently paying council tax on your holiday home or instead pay business rates, and the pros and cons of each of these options.
Should you be paying business rates or council tax?
The answer on this question comes down to two elements; what you use your second home for and how many days you let it out for.
- When your second home is used purely for you and your family you should be paying council tax.
- If you have a second home and it’s available for short term lets by paying guests for more than 140 days of the year then it should be assessed for business rates and added to the business rates list.
There are currently only 47,307 holiday homes liable for business rates in England. This would suggest that many holiday homes are potentially paying council tax when they should instead be paying business rates. So is there any benefit to doing so if you’re currently paying council tax on a property you let out to guests for a large proportion of the year?
The potential advantages of business rates
Small Business Rate Relief provides 100% relief from business rates on properties with a rateable value of £12,000 or less. This is provided the business uses only one property. It is however worth bearing in mind that relief of this type may still be available under certain circumstances. Therefore it’s worth consulting with your local ratings department if you are unsure.
There is also a concern that some second home owners are registering for business rates to avoid paying council tax. Currently there is little in the way of monitoring to ensure that holiday homes qualify for small business rate relief. For this reason the The Secretary of State for Housing, Communities and Local Government has launched a consultation:
- Consultation on the business rates treatment of self-catering accommodation – closes on the 15th January 2019
This article is only meant as a top line summary of these issues. Need more guidance on whether you should be paying business rates or council tax? We recommend that you seek a professional working in this area. You can also contact the Valuations Agency Office.
Boshers are specialist providers of holiday home insurance. For information on how we can help protect your holiday let business ,call us on 01237 429444.