Government to end holiday let tax loophole: what this means for homeowners

Small Business Rate Relief will be taken away from holiday lets that are left empty, it has been announced.

The reforms – set to come into effect from April 2023 – clamp down on a loophole allowing homeowners to avoid paying their “fair share of tax”.

Under current laws, homeowners can avoid paying council tax and claim Small Business Rate Relief by claiming that their properties are holidays lets – even if they are left empty year-round.

The new rules, however, will mean that owners of holidays lets will have to prove that their properties are being rented out for a minimum of 70 days a year and available for let for a minimum of 140 days a year.

While the new rules come into force from April 2023, letting and marketing activity from April 2022 will be taken into account.

It means that holiday let owners will have to provide evidence such as the website or brochure used to advertise the property, letting details, and receipts.

According to the latest statistics, around 65,000 holiday lets in England are liable for business rates. Around 97 per cent of those have rateable values of up to £12,000, meaning they are eligible to claim Small Business Rate Relief.

Commenting on the new rules, Secretary of State for Levelling Up, Michael Gove, said: “The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

Kurt Jansen, Director of the Tourism Alliance, added: “Establishing these new operational thresholds for self-catering businesses is welcomed by the tourism industry as it makes a very important distinction between commercial self-catering businesses that provide revenue and employment for local communities, and holiday homes which lie vacant for most of the year.”

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