Focus on Holiday Homes

As part of the ‘Tax Day’ in March 2021, Government announced legislation to tighten tax rules for second property owners in England, meaning they can only register for business rates (and subsequently associated reliefs) if their properties are genuine holiday lets.

Owners of second homes in England who switched their holiday retreats to lets, taking advantage of the small business rates relief scheme - paying little or no property tax - have been entitled to grant funding worth £1.33 billion during the pandemic.

At the onset of the pandemic, holiday homes were entitled to grants in Spring 2020 - worth up to £552.23 million, in addition to top up grants worth a further £256.84 million in January 2021. ‘Restart grants’ available from 1st April 2021 provided further funding of up to £522.33 million.

Owners of holiday homes in England who make their properties available to rent for 140 days of the year, are currently entitled to claim 100% small business rates relief if their properties have a Rateable Value of less than £12,000; meaning that they pay no business rates and no council tax. Whilst for those holiday homes with a Rateable Value between £12,001 to £15,000, the level of rates relief is tapered gradually going down from 100% to 0%. The small business rates regime covers 96% of holiday homes. An extra 8,936 homes, in both England and Wales, were classified as holiday homes during the 2020 calendar year, having become commercial premises for the purpose of business rates.

The Government state the new criteria, yet to be published, will ensure that owners of properties in England who are not genuine businesses are unable to reduce their tax liabilities by declaring that a property is available for let while making little or no realistic effort to actually let it out.

In Wales, where rates are devolved, holiday homes are rated as a self-catering property and valued for business rates if both the following criteria is met:

• available to let for short periods that total 140 days or more per year and; • actually let for 70 days