Owners of holiday lets and second homes in England have been able to avoid council tax by registering their properties as businesses. However, from April 2023, small business rates relief will only be available if a property is let out for a minimum of 70 days a year. If you let out a second home, you may want to start planning now.

In the vast majority of cases, registering a property as a business has meant that small business rates relief is available, meaning no business rates are payable. Business registration has been possible for properties available to let for 140 days or more in a year, even if little or no realistic effort is made to attract lettings.

Changes from 1 April 2023

To benefit from business rates after next April, owners will have to:

• Prove that a property is available as self-catering accommodation for 140 days a year, with this test met for the coming year and also the previous year: and
• Actually, rent out the property as self-catering accommodation for a minimum of 70 days a year.

It will be necessary for property owners to provide evidence, such as the website or brochure used to advertise the property, letting details and receipts.

Wales already applies similar criteria, with Scotland making changes from April 2022.

For the purpose of accounting for those 70 days, both council and business rates look at the property’s status at the end of a day. For example, if a property is let from Friday evening to Sunday morning, it is treated as let for two days using the occupancy for the Friday and Saturday nights.

New lets

There are no special rules being introduced for newly available lets, so a new let will be liable to council tax until the property has been available for 140 days and actually rented out for 70 days. Business rates will not be available until both criteria are met, subject to the property being advertised as self-catering accommodation for 140 days in the coming year.

The government’s press release on closing the tax loophole on second homes can be found here.