Government considers easing holiday let business rates thresholds
A government consultation is exploring changes to the occupancy thresholds for holiday lets to qualify for business rates, potentially reducing financial pressure on holiday let landlords facing high council tax charges.
The government is consulting on possible adjustments to the rules that determine whether holiday let properties qualify for business rates or are treated as domestic second homes for council tax purposes. Currently, holiday lets must be available for rent at least 252 days a year and actually let for a minimum of 182 days to qualify for business rates. Properties failing to meet these thresholds are liable for council tax, often with additional premiums up to 300% in some areas.
This consultation could lead to a reduction in the 182-day minimum letting requirement, although the exact new threshold has not been specified. It also considers exemptions for holiday lets that are part of larger tourism businesses, multi-unit accommodation, properties with planning restrictions on permanent occupancy, and self-catering units located on working farms or within an owner’s home grounds, provided they continue operating commercially.
Current holiday let thresholds and their impact
The existing thresholds were introduced to distinguish genuine holiday let businesses from second homes, aiming to ensure that only properties genuinely operating as businesses benefit from business rates. However, many holiday let operators argue that the 182-day letting requirement does not reflect the realities of seasonal tourism, especially in areas with shorter peak seasons.
Failing to meet the threshold means properties are treated as second homes, attracting higher council tax bills and premiums, which can significantly impact profitability. This has led some holiday let landlords to aggressively pursue bookings throughout the year to avoid council tax liabilities, sometimes at the expense of business sustainability.
Industry voices, such as Phil Schofield from insurance provider Schofields, have welcomed the consultation. He pointed out that more flexible rules could relieve financial pressure on smaller, family-run holiday let businesses reliant on seasonal tourism. He also advised landlords to continue planning around current thresholds while the consultation is ongoing, suggesting strategies to boost occupancy outside peak seasons.
Implications for holiday let landlords and agents
Should the government reduce the letting day threshold or introduce exemptions, holiday let landlords may find it easier to qualify for business rates, reducing council tax liabilities and improving cash flow. This could particularly benefit those operating in seasonal markets or with properties subject to planning restrictions limiting year-round occupancy.
For landlords and letting agents, the potential changes mean reviewing current letting patterns and marketing strategies to maximise bookings within the current framework while preparing for possible new rules. Diversifying marketing channels, targeting niche markets such as remote workers or pet-friendly stays, and offering off-season discounts could help increase occupancy and meet thresholds.
Agents advising holiday let landlords should monitor the consultation closely and ensure clients understand the current requirements and the potential impact of any changes. It will also be important to keep accurate records of availability and bookings to demonstrate compliance with whichever thresholds apply.
What remains uncertain and what to watch
The consultation has not yet specified the new proposed minimum letting day threshold or detailed the criteria for exemptions. The timing of any changes is also unclear, meaning landlords must continue to comply with current rules for the foreseeable future.
Landlords should watch for official government announcements on the outcome of the consultation and any subsequent legislative changes. Local authorities’ interpretation and enforcement of the rules may also vary, so staying informed about local council tax policies and any premiums applied to second homes remains essential.
Additionally, the consultation’s consideration of exemptions for holiday lets within wider tourism businesses or with planning restrictions could create new categories of qualifying properties, but the details and practical application of these exemptions are yet to be clarified.
Practical steps for landlords now
While the consultation is ongoing, landlords should continue to aim to meet the current 182-day letting threshold to avoid higher council tax charges. This involves actively marketing properties beyond peak seasons and exploring niche markets to boost bookings.
Maintaining detailed records of availability and bookings is crucial to defend business rates eligibility. Landlords may also want to review their property’s planning status and any restrictions that could affect occupancy to understand how potential exemptions might apply.
Engaging with letting agents who understand the holiday let sector’s unique challenges can help optimise occupancy and compliance. Landlords should also stay updated on government guidance and local council policies to respond promptly to any regulatory changes.
Supporting landlords through regulatory changes
The Landlord Association (TLA) offers resources and support to landlords managing holiday lets amid evolving regulations. Membership provides access to compliance guides, practical advice on managing occupancy records, and updates on government consultations affecting holiday let business rates.
TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, is designed to help landlords organise their portfolios and rental documentation efficiently. ORBIT can assist holiday let landlords in recording bookings, managing documents related to planning restrictions, and tracking communications with letting agents and local authorities.
Exploring TLA membership and ORBIT BETA access can help landlords stay organised and prepared for any changes arising from the consultation, ensuring they maintain evidence of compliance and make informed decisions about their holiday let businesses.
Holiday let landlords should consider reviewing their current letting patterns, marketing strategies, and record-keeping practices now to be ready for any adjustments to the thresholds. Staying engaged with industry updates and compliance resources will be vital as the government’s consultation progresses.
Sources: Landlord Today
TLA - The Landlord Association