Holiday homes tax loophole will cost treasury £170 million – claim

Holiday and second homeowners can avoid council tax provided they make their properties available to rent and do so for just 10 weeks of the year.

St Ives

Local and central governments are losing out on millions of pounds of council tax income because the Government’s business rates system is still giving many holiday home and second homeowners the opportunity to avoid paying the tax, provided they make their properties available to rent and do so for just 10 weeks of the year.

Colliers estimate the total loss to government due to the system of business rates relief for holiday lets in England and Wales alone is now around £170 million a year (2023/2024).


Property owners who make their properties available to rent as holiday lets for 140 days of the year can claim they are a small business and as such can elect to pay business rates instead of council tax.

But as small businesses they can claim for relief on 100% of the business rates payable if their properties have a rateable value of less than £12,000. Those properties with a rateable value between £12,000 and £15,000 are also entitled to a relief on a sliding scale in line with the Government’s business rates relief policy.

There are now over 85,044 holiday let properties in the business rates lists in England and Wales that are eligible for 100% business rates relief and as such do not pay business rates or council tax. Colliers estimate this is reducing income to local authorities of around £170 million a year.

In Cornwall, where holiday hotspots like St Ives (main picture) are plagued with second homeowners, £27 million of extra income would be raised every year by closing the loophole.

Since April 2023 a property can only qualify to be in the business rates list if it is made available for rent for 140 days a year and let out for short periods totalling at least 70 days.


But John Webber, Head of Business Rates at Colliers, says: “These measures are not strong enough to deter businesses ‘flipping’ into the business rates list and thus reducing the local authority’s ability to collect funds.

John Webber, Colliers
John Webber, Colliers

“A second homeowner can still let out their property for only 10 weeks of the year and would be able to avoid paying any business rates or council tax.

“The fact that the number of properties entering the business rates lists is still growing, is a testament that the deterrent is not working.”

“Agents selling properties in popular domestic holiday areas positively advertise the rates savings advantages, which has probably contributed to the further rise in house prices.”

“The problem is not second homeowners, it is politicians failing to understand the issues and having the courage to do something about it.”

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