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Holiday home landlords ‘flip’ properties to avoid new council tax charge
12:01 AM, 4th June 2025, 11 months ago
7
A loophole allowing holiday homeowners to sidestep council tax by registering properties under the business rates system is costing the UK government £334 million annually, experts say.
Colliers warns that despite tightened regulations; second homeowners are exploiting the system by renting out properties for just 10 weeks a year to qualify as small businesses.
Doing so, the real estate firm says, means they avoid both council tax and business rates.
The firm adds that new policies allowing local councils to charge double council tax on second homes in England, and even higher rates in Wales, are backfiring.
Flip a holiday home
The firm’s head of business rates, John Webber, said: “This will just encourage more second homeowners than ever to ‘flip’ their properties into the business rates list when they can.”
The policy, which has been adopted by 78% of English councils and 91% of Welsh councils, aims to curb second home ownership but is driving owners to exploit the loophole further.
In the southwest of England, particularly Cornwall, the impact is stark.
Colliers’ analysis reveals 21,678 holiday let properties in Cornwall, Devon, Dorset and Somerset claim full business rates relief.
The move is depriving local councils of more than £105 million in potential council tax revenue at Band D levels.
In Cornwall, 10,731 properties escape both taxes, costing the council £52 million annually.
Double council tax policies
Nationally, 73,838 holiday let properties in England and Wales benefit from 100% business rates relief, a slight drop from last year due to stricter criteria.
However, Mr Webber predicts a surge as double council tax policies push more owners to switch systems.
He said: “Although current measures in place are tighter than they have been in the past, they are just not strong enough to deter second property owners ‘flipping’ into the business rates list and thus reducing the local authority’s ability to collect funds.
“Local authorities seem to have managed to return some properties to the council tax lists, but this is still not enough.
“A second homeowner can still let out their property for only 10 weeks of the year and therefore avoid paying any business rates or council tax.
“The fact that the number of properties entering the business rates lists remains high, is a testament that the measures are not working.”
‘Doubling council tax on second homes’
Mr Webber said: “If Cornwall Council believes doubling council tax on second homes is the answer to deterring second homeowners and solving the local housing crisis they are living in cloud cuckoo land.
“Offering either double tax or no tax will only encourage even more people to try to flip from council tax to business rates.
“And even if some second homeowners are deterred and sell up and leave the area, locals are unlikely to be able to afford such housing and local businesses that were supported by these owners and their properties will also suffer, depleting the tax take even further.”
Lack of social housing
Mr Webber continued: “Politicians bicker about the lack of social housing in places like Cornwall and portray people buying second homes as the villains.
“Yet if Cornwall Council had been able to charge holiday let owners at least the same as a council taxpayer they would have received more than £150 million of extra income in the last five years alone, which they could have spent on building affordable housing in the county.”
He added: “The problem is not second homeowners; it is politicians failing to understand the issues and having the courage to do something about it.
“The government should reform the whole system and do it thoroughly.”
Tags:
business rates, Cornwall tax loss, council tax, holiday homes, local government finance, second homes, Tax loophole, UK tax revenue
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Member Since December 2023 - Comments: 1587
8:06 AM, 4th June 2025, About 11 months ago
Another blindingly obvious result of the government’s policy to tax property.
Do government ministers and their sidekicks in the Civil Service not do any ‘what if’ analysis?
Member Since October 2024 - Comments: 9
7:25 AM, 5th June 2025, About 11 months ago
Simple rule of thumb. The population are happy to pay fair taxes. As soon as taxes are unfair they generally backfire.
Member Since January 2025 - Comments: 91
10:00 AM, 5th June 2025, About 11 months ago
Reply to the comment left by David Dean at 05/06/2025 – 07:25
The Laffer Curve is the theoretical relationship between tax rates and government revenue, suggesting that there’s an optimal tax rate that maximizes revenue. Excessively high or low tax rates can actually lead to reduced government income due to disincentives and economic activity. The curve shows that a tax rate cut can lead to higher, not lower, tax revenue.
Member Since May 2025 - Comments: 75
4:07 PM, 10th June 2025, About 11 months ago
Until April this year, Furnished Holiday Lets were considered a business so were entitled to business rates if a threshold was achieved.
There is (was) a difference between HMRC treatment and the Valuation Office criteria (which sets business rates).
HMRC stated it must be available for let for
at least 210 days per year and actually let for 105 days. Personal use and discounted lets had to be excluded. Letting for 105 days is actually not that easy in the cold UK. You can just about do it with 6 weeks in the summer and fully booked for all school holidays throughout the year. Now this has been scrapped so we are left with the business rates criteria only.
The business rates criteria is that it must be available for let for 140 days and actually let for 70 days. So it’s actually easier now but 70 days is still a push unless your holiday let is in a popular year a round tourist area eg Bath, London, Edinburgh.
If you dont achieve 70 days you will automatically be switched back to council tax (and done retrospectively).
This article implies that “Second Home” owners are dodging some council tax by making properties a Holiday Let.
Running a holiday let is actually a pretty intensive business (like most hospitality businesses) and to be honest if your goal is to avoid paying council tax then the reality is you’re better off paying council tax than getting business rates treatment and all the hard work associated with running a holiday let.
For start you will have to pay for bin collection which usually costs not far off the cost of council tax.
For my property (which I was forced to register with business rates – I was quite happy staying on council tax), I have to pay tourism levies, bin collection etc. Probably it’s costing me more.
If you have more than 1 property which is treated as a holiday let then unfortunately you have to pay business rates on the second property (which is significantly higher than council tax).
If I’m forced to switch back to council tax it won’t bother me. As it’s a business the council tax is tax deductible anyway and to be honest I will probably be financially better off.
My Holiday Let is in a very touristy area – summer bookings for 6 weeks and half term was no problem but it’s ghost town in the winter. 105 days per year of bookings was a challenge. Fortunately I discovered that there was business demand so ended up providing business service accomodation.
This is really a non article – not sure where it originated but clearly someone thinks there’s some more tax when there isnt and that anyone owning property is somehow dodging tax.
Member Since May 2025 - Comments: 75
4:20 PM, 10th June 2025, About 11 months ago
Reply to the comment left by Person Of The People at 05/06/2025 – 10:00
Yep. I’m at that point. I’m no longer going to play Rachel from accounts and Two-Tier’s game.
Currently buying in Spain so I will no longer resident in the next tax year. I’ll definitely be paying less tax because I won’t be here.
Member Since September 2018 - Comments: 3538 - Articles: 5
6:27 PM, 10th June 2025, About 11 months ago
Reply to the comment left by Steve Roberts at 10/06/2025 – 16:20
…but still paying the same tax via properties let here presumably?
Member Since May 2025 - Comments: 75
7:43 AM, 11th June 2025, About 11 months ago
Reply to the comment left by Reluctant Landlord at 10/06/2025 – 18:27
All rental properties in companies now and if not I’m selling them. Means I can pay into a real pension rather than living in the misguided belief that “these properties are my pension”.
Unfortuantely it seems impossible to avoid huge CGT bills regardless where you live.