Government closes tax loophole on second homes

New measures will see owners of second homes who abuse a tax loophole by claiming their often-empty properties are holiday lets forced to pay.

Currently, owners of second homes in England can avoid paying council tax and access small business rates relief by simply declaring an intention to let the property out to holidaymakers.

The Department for Levelling Up, Housing and Communities has said that the changes will target people who take advantage of the system to avoid paying their fair share towards local services in popular destinations such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly.

Around 65,000 holiday lets in England are liable for business rates of which around 97 per cent have rateable values of up to £12,000.

Second homeowners must pay council tax if they are not genuine holiday lets. From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, where they meet the criteria. Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Levelling Up Secretary Michael Gove said: “The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities. However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost. The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

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