01-06-2025
The double council tax loophole that will cost councils £334million - as locals in second home hotspots 'pay the price'
Second home owners dodging the double council tax bill is set to cost local authorities £334million.
Since April 1, local authorities have been able to charge a 100 per cent premium on second homes under new powers introduced in the 2023 Levelling Up and Regeneration Act. In Wales, they can charge premiums of up to 300 per cent.
However, crafty property barons found a loophole which allows them to dodge paying their taxes by classifying their second homes as holiday lets and renting them out for 70 nights of the year.
The tax dodging move means the properties qualify for business rates relief and also makes owners exempt from paying any council tax at all.
In the past year, the sum of lost council tax revenue has doubled from £170m, according to research by property firm Colliers.
Now, politicians and experts say the soaring figures prove the 100 per cent premium tax raid is doing more harm than good.
Shadow housing minister Kevin Hollinrake critiscied the Government for their backfiring tax raid.
'Labour couldn't even be bothered to carry out any impact assessment, nor have they asked councils to restrict the policy to where there are localised problems in the housing market,' he said.
John Webber, of Colliers, said it's 'making the situation even worse' and pointed out that 'less money will be collected locally' which will result in less spending on things locals actually need, such as public services or affordable housing.
He added: 'The problem is not second home owners; it is politicians failing to understand the issues and having the courage to do something about it.'
A whopping 230 out of 296 councils in England, and 20 out of 22 in Wales took the Government up on their offer and imposed the inflated levy.
To be considered a holiday let, owners must make their property available for at least 140 nights and actually let it out to visitors for 70 nights in one year.
In order to work out the business rates bill an owner pays, the council uses the property's rateable value which is based on its type, size, location and how much money they would make renting it out to holidaymakers.
If they only let one property then they may qualify for small business rates relief which could see them offered up to 100 per cent relief.
Properties with a rateable value of £12,001 to £15,000, will see the rate of relief go down gradually from 100 per cent to 0 per cent.
For example, if the rateable value is £13,500, the owner will get 50 per cent off their bill.
There are an estimated 73,838 holiday let properties that qualify for business rates relief in England and Wales.
This is down from 80,000 last year thanks to tougher restrictions but Colliers expects numbers to shoot up again due to the double tax raid.
Before 2023, property owners just had to declare an intention to use their home as a holiday let to meet the business rates relief qualifications.
