Second Home Tax Loophole Closed

Michael Gove recently unveiled new plans to tackle the tax loophole that has enabled second-home owners to avoid paying council tax, instead registering for business rates (usually a cheaper alternative) or accessing small business rate relief, by claiming their non-primary residence as a holiday let.

Currently, in order to avoid council tax, owners only need to declare that they intend to use their second home as a holiday let – no proof is needed. What’s more, 97% of England’s holiday lets are below the business rate threshold, meaning the majority are eligible for small business rate relief. The consequence of this is that many properties are left vacant, often in tourist hot-spots, as second-home owners take full advantage of this tax loophole. The government states that the new legislation will help to protect those holiday lets that are truly genuine and create a fairer system.

What Are The New Rules?

As of April 2023, second-home owners will need to provide evidence that their property has been let to holidaymakers for at least 70 days a year, as well as being available to rent for at least 140 days per year. If owners are unable to prove this, they’ll be forced to pay council tax.

In a statement, Michael Gove said: “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.”He then went on to say: “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.”

For More Information

To find out more, take a look at the government’s press release or contact us for specialist advice on your individual situation. We’ll guide you through the new requirements and ensure that you’re fully compliant with the latest legislation yet remain as tax efficient as possible.