UK Government Considers Taxing Airbnb Rentals as Second Homes

The UK government is reportedly considering a significant shift in how short-term holiday lets, such as those listed on Airbnb, are taxed. Under potential new measures, these properties could be reclassified from business assets to second homes, subjecting them to council tax instead of business rates.

Currently, many properties rented out for short periods can qualify for business rates relief if they meet certain criteria, including being available for at least 140 days a year and let for at least 70 days. However, the government has acknowledged concerns that this relief is being exploited by second homeowners primarily to reduce their tax liabilities, rather than operating genuine local businesses.

Treasury minister James Murray confirmed in response to a parliamentary question that ministers are reviewing the tax treatment of short-term lets and seeking input from stakeholders. "Concerns have been raised about Small Business Rates Relief being used by second homeowners whose main aim is not to operate a local business but to manage tax liabilities," Murray stated. He added that announcements on the matter would be made "in due course."

This potential policy change comes shortly after the government announced details of a 'tourist tax,' which would permit local mayors to levy charges on overnight stays. The prospect of taxing holiday lets as second homes has drawn criticism from industry representatives.

Alistair Handyside, chairman of the Professional Association of Self-Caterers, warned that the change could add an average of £3,000 in annual costs for holiday let owners. He emphasized that many such businesses are run by individuals seeking a secondary income, such as working mothers or retirees, and that they are already heavily taxed. Handyside also highlighted the vital role of holiday lets in providing accommodation in areas lacking sufficient hotel capacity, thereby supporting local economies.

Business rates are typically calculated based on the property's rateable value, which reflects its potential market rent. Properties with a rateable value of £12,000 or less, and which are the only property used by the business, are often exempt from charges. Relief is also available for properties with rateable values between £12,001 and £15,000.

A Treasury spokesperson stated that the Chancellor is focused on supporting families and businesses and driving economic growth, while adhering to fiscal rules. The spokesperson declined to comment on rumor or speculation, indicating that tax decisions are typically announced at fiscal events.