• Changes made to the tax treatment of holiday lets 
  • Crackdown On 60,000 self-catering properties in England are registered for business rates
  • Other changes stated in the Government’s Tax policies and consultations publication?

The Government will tighten the rules to regulate second-home owners who are falsely claiming tax breaks.

The treasury became concerned that some people are claiming to let out their second home while putting minimal effort into doing so. This allows people to receive tax breaks that they are not entitled to. 

Some second-home owners in the UK have avoided council tax on the properties by saying that they are holiday lets. The current rules allow them to be charged business rates. Moreover, a large proportion of these properties qualify for Small Business Rate Relief. Therefore, if the property has a rateable value of less than £12,000, they are fully tax-exempt, allowing for significant savings.

New Regulations

The Government plans to toughen the rules with the new move laid out in the Government’s Tax policies and consultations publication. People who state that they manage a holiday rental will be required to prove that the property is rented out for a minimum of 140 days per year.

How Relevant Is This Issue?

Government statistics show:

  • 60,000 self-catering properties in England are registered for business rates.
  • 96% of these premises have a rateable value of less than £12,000 – likely qualifying for Small Business Rates Relief. 

It is unknown how many of these are private second homes and how many are honest holiday lets. The new regulations aim to combat this uncertainty. 

How Will This Affect Second-Home Owners?

Second-home owners who have been getting business rates will be obliged to guarantee that it is rented out for at least 140 days per year. They must prove to be genuine holiday lets if they want to continue receiving the lucrative tax break. Otherwise, they will now be required to pay council tax on their property. 

Other changes made in the Government’s Tax policies and consultations publication

Regulating second-home owners falsely claiming tax breaks was the most notable move in the tax policy document, but the publication also identified many other property-related changes. 

The Government published proposals to start a consultation in 2022 on creating an additional tax on the largest residential property developers. The Government’s new reporting requirements also evidenced plans to simplify inheritance tax. The Tax policies and consultations publication also laid out steps towards making rules on land and property VAT exemptions clearer.