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Holiday let business rates - Salcombe holiday lets

Whether you plan to use your second property for your own holidays or let it out and make a profit, you are required to pay certain rates and taxes. Our guide to holiday let business rates and council tax for second homes in England will help you understand the difference.

We’ve put together a list of the most commonly asked questions so you can be informed about the right thing to do when it comes to your holiday home. 


Holiday Let Business Rates & Council Tax Guide 2024

Use the links below to skip to a specific topic or read on for a full guide to holiday let business rates and council tax.


How has the Spring 2024 Budget affected Furnished Holiday Lets?

On 6th March 2024, the Budget included an announcement that the Furnished Holiday Let tax regime would be removed from 1st April 2025. There will likely be a period of transition from that date. Technical guidance is due to be released shortly, which we’ll scrutinise alongside the legislation changes, and will update this page as soon as possible subsequently. As it stands, the tax regime in this blog is still in existence.


What are holiday let business rates?

What are holiday let business rates?

Holiday let business rates are taxes or rates paid on properties that are let commercially. The funds are used to help finance local services in the same way as council tax on domestic properties. Business rates are charged on most non-domestic properties, including self-catering holiday lets.

If you own a second home or holiday home that you rent out to the public you will need to pay holiday let business rates. If you only use the property for yourself, you’d pay council tax as you are not getting any monetary gain from it.


What is the difference between holiday let business rates and council tax?

Holiday let business rates and council tax are two distinct forms of local taxation in the UK. They apply to different types of properties and circumstances. 

Holiday let business rates:

  • These rates apply to properties that are used for commercial purposes, specifically for providing short-term accommodation to paying guests.
  • As of April 2023, holiday let business rates only apply if your holiday let meets certain criteria (your property was available to holiday let for 140 nights or more and was actually let for 70 nights or more, in the last 12 months).
  • The amount you pay is based on the rateable value of your property based on its size, location, quality, type, and how much income it will potentially generate.

Council Tax:

  • Council tax is a local taxation system used in the UK on domestic properties.
  • If your holiday let does not qualify for holiday home business rates, then you will be required to pay council tax.
  • The amount you pay depends on the value of your property and its location. Some councils may charge premiums of 200% to 300% for holiday lets.

Find out how much council tax you need to pay by going to the Gov website.


Holiday lets register

3. Do I have to pay business rates or council tax on my holiday let?

Recently, the Government has announced that they’ll be introducing a ‘holiday let registration scheme’. This will make it mandatory for all holiday lets to be registered with the government, contributing to a simple online register which will show reliable data on all of the holiday lets in the UK.

The aim is to gain insight into the impact of short-term holiday lets and gather information that will improve the government’s understanding of the benefits and challenges associated with holiday home letting. The opportunities and impact of short-term tourism on communities will also be investigated.

There is still limited information on the details of the scheme and when it will come into place, but the government website will be updated as more details become available. Read the Government press release for more information on what to expect from the scheme.


Current rules on holiday let business rates

According to the government website, from April 2023 the current rules on holiday let business rates are as follows: 

Properties in England can be rated as a self-catering property and valued for business rate if they are: 

  • Available to let for short periods of at least 140 nights in total over the current and previous tax years. 
  • Are actually let for at least 70 nights within the last 12 months.

For properties in Wales, the rules are slightly different. Properties will be rated as self-catering properties and qualify for business rates if both of the following apply:

  • They are available to let for short periods of at least 252 nights in total over the current and previous tax years.
  • They are actually let for at least 182 nights within the last 12 months.

Changes to holiday let business rates

At the time of writing (1st February 2024), there are no proposed changes expected to holiday let business rates. 

However, we would advise you to keep an eye on the Government website as rules and regulations change periodically. Or give our team a call on 01548 802171, as our in-house legal team keep up-to-date records of any changes to legislation. 


Do I need to pay business rates or council tax on my holiday let?

To determine the appropriate taxes for your property, you need to work out whether it is classed as a holiday let. 

If your property is in England, used primarily as commercial self-catering accommodation, is available to let for 20 weeks (140 days) or more in a year and is actually let for 70 days in that year, then you can register for business rates rather than paying council tax. 

When it comes to self-catering holiday lets, there is a positive in that they can be treated as a trade business, providing the conditions are met for them to qualify as a furnished holiday letting. This means they may be able to qualify for small business rates relief

Some furnished holiday lettings pay no council tax or business rates. This is due to their property qualifying for small business rates relief, providing 100% exemption. You can find out more about this on the HMRC Website.  


How do I qualify as a Furnished Holiday Let?

How do I qualify as a Furnished Holiday Let?

To qualify as a furnished holiday letting, your property needs to adhere to strict requirements set out by the government. These rules are:

  1. The property needs to be adequately furnished.
  2. Your property must be available to rent for holiday-makers for at least 210 days (30 weeks) per year.
  3. Your property must be rented out as holiday accommodation to the public for at least 105 days (15 weeks) of the 210 days you have made it available.
  4. It must be situated in the UK. 
  5. If your Furnished Holiday Let is rented out by the same person for more than 31 days, there shouldn’t be more than 155 days (22+ weeks) of this type of ‘long-term’ occupation per year. 

If your property qualifies as a furnished holiday letting, you will need to register with your local council for business rates. For properties in South Devon, contact the South Hams District Council business rates team

For an in-depth look at how to qualify as a furnished holiday letting and the tax relief benefits that are available, read our Furnished Holiday Let tax guide.


Is it cheaper to pay holiday lets business rates or second home council tax?

If your holiday let property qualifies for business rates as per the Government’s update, you will no longer be required to pay second home council tax. This can be beneficial as business rates are sometimes cheaper than council tax.

Some owners of furnished holiday lettings pay no council tax or business rates. This is because their property qualifies for Small Business Rates Relief, which provides 100% exemption. It’s always worth checking whether you qualify by speaking to your local council.


How are business rates calculated on Holiday lets?

Business rates in England are calculated using a two-step process. First, your holiday home will be given a rateable value. Second, the rateable value is multiplied by the unique business rate as set out by the government.

Step 1: Find the rateable value of your business

Your holiday let will have a rateable value based on the rental value of the property. The local property tax you pay depends on your property type, size, location, and income you could receive.

Your local authority will calculate the business rates for your property based on its ‘rateable value’.

Check the rateable value of your property.

Step 2: Work out your holiday let business rates

Once you have the rateable value of your property, this is then multiplied by the uniform business rate as given by the government.

If your rateable value is less than £51,000, you qualify for the small business multiplier rather than the standard multiplier. At the time of writing (1st February 2024), the small business multiplier is 49.1 pence and the standard multiplier is 51.2 pence

Year

  Standard Multiplier (pence)  

  Small Business Multiplier (pence)  

2019 to 2020 50.4 49.1
2020 to 2021 51.2 49.9
2021 to 2022 51.2 49.9
2022 to 2023 51.2 49.9
2023 to 2024 51.2 49.9


*Information from HMRC website (2024)

Estimate your business rates online

Click here for an example of how to work out your business rates

John owns a holiday home in Salcombe that qualifies as a holiday let business. The rateable value of his property is £10,000, so he uses the small business multiplier to estimate the annual business rate.

£10,000 (rateable value) x £0.499(small business multiplier) = £4,990 (basic business rates) 

The good news is, because the rateable value of his holiday let is less than £15,000, he may be able to reduce the cost by applying for small business rate relief.


Small business rate relief

Small business rate relief is available to businesses in England where the rateable value of the property is less than £15,000. Businesses with a rateable value of up to £12,000 receive 100% tax relief.

While businesses with a rateable value between £12,001 and £15,000 receive a tapered tax relief anywhere from 0% to 100%. 

Visit the HMRC page for information on Small Business Rates Relief.


Holiday Letting Advice

For further clarification and to ensure that you have all the details that you require to run your holiday let, contact your local council. They will be able to help you find out about your business rates, small business rate relief, and how to pay your bill. 

If you would like to find out more about letting your holiday home, call our experienced team on 01548 802171 or visit our Let Your Cottage page to request a free Owners Guide today.

Further information on the impact of government reviews into short-term tourist accommodation, and changes to business rates can be found on the housing and communities section of the government’s website, as well as in the following articles:

Autumn statement 2023 Business Rates Factsheet

Business Rates Relief Scheme 2024

Disclaimer

The information contained in this article was accurate at the time of writing (February 2024), based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like more up-to-date information. 

Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc) in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA. 

As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.