UK Government Considers Taxing Short-Term Lets as Second Homes
The Treasury is examining concerns that business rates relief is being exploited by some holiday let owners, potentially leading to higher costs for property owners and holidaymakers.
The UK government is exploring the possibility of taxing short-term holiday lets, such as those found on Airbnb, as second homes rather than businesses. This potential shift could impact thousands of property owners and holidaymakers across England.
Currently, properties rented out for short-term holidays can qualify for business rates relief instead of council tax if they meet certain criteria, including being available for at least 140 days a year and actually let for at least 70 days. However, the Treasury has acknowledged concerns that this relief is being used by second homeowners primarily to manage their tax liabilities rather than to operate genuine local businesses.
Treasury minister James Murray stated in response to a parliamentary question that the government supports investment in local economies and legitimate small businesses. He confirmed that ministers are seeking input from stakeholders regarding the tax treatment of short-term lets and will make announcements in due course. One proposal being considered is to subject all self-catered accommodation to council tax.
Critics of the potential change warn that it could impose additional annual costs of up to £3,000 on average holiday let owners. Alistair Handyside, chairman of the Professional Association of Self-Caterers, suggested that this could force some owners to sell their properties or increase rental prices, ultimately impacting the availability of accommodation in areas that lack sufficient hotel spaces.
He emphasized the role of holiday lets in supporting local economies by providing accommodation for visitors. Business rates are typically calculated based on a property's 'rateable value,' which represents its potential market rent. Properties with a rateable value of £12,000 or less, and which are the sole property used by a business, are exempt from charges. Relief is tapered for properties with rateable values between £12,001 and £15,000.
A Treasury spokesperson reiterated the Chancellor's focus on providing economic relief and stimulating growth, while adhering to fiscal rules. The department declined to comment on specific rumors or proposals, stating that decisions on taxation are typically announced by the Chancellor at fiscal events.
The government's consideration of taxing short-term lets follows the recent announcement of a 'tourist tax,' which will allow local mayors to implement charges on overnight stays. This move signifies a broader review of how properties used for short-term rentals are treated for tax purposes.