Government closes tax loophole on second homes

Owners of second homes who abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay under new measures announced by the government.
Beadnell has among the highest proportion of holiday homes in the country.Beadnell has among the highest proportion of holiday homes in the country.
Beadnell has among the highest proportion of holiday homes in the country.

Currently, owners of second homes in England can avoid paying council tax and access small business rates relief by simply declaring an intention to let the property out to holidaymakers. However, concerns have been raised that many never actually let their homes and leave them empty and are therefore unfairly benefiting from the tax break.

Following consultation, the government will now bring changes to the tax system, which will mean second homeowners must pay council tax if they are not genuine holiday lets.

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From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, where they meet the criteria.

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

Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Michael Gove, Secretary of State for Levelling Up, said: “The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.

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“However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

“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.”

But Crispin Truman, chief executive of CPRE, said: “While we support plans to stop people abusing a holiday home tax loophole, these proposals don’t go far enough. There is a rapidly growing housing crisis across rural England and the government needs to get a grip of it, fast. Ministers must do much more to meet the affordable housing needs of rural communities.

“We've lost 150,000 private rented homes, with the boom in Airbnb-style lets clearly contributing to that loss. The dip in available rentals is having a devastating impact on our already struggling rural communities. We’re seeing families stranded on social housing waiting lists while perfectly good properties sit empty much of the year.”

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Beadnell housing campaigner Jen Hall added: “The government consulted on this change three years ago. They know it will make little difference to communities already overwhelmed by holiday let properties. These will still be able to pay no Council Tax or Business Rates and to leave their property standing empty for 42 weeks of the year.

“Wales closed this loophole years ago but have since gone on to double Council Tax on second homes in areas with a high concentration of non-resident properties. They ringfence the additional income to support these communities for example by building affordable housing. Nobody even knows how many holiday lets there are across the country or how safe they are. The government needs to regulate the industry with properties being registered the same as any other accommodation providers

“It's not ‘levelling up’ if private landlords, who provide a valuable service taking the pressure off council waiting lists, have far fewer tax allowances than owners of holiday lets.”

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