Big tax increases for owners of second homes and holiday lets in Wales

10 March 2022

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Owners of second homes in Wales could face increases of up to four times their current level of council tax after the Welsh Government published the outcome of the 2021 consultation on ‘Local taxes for second homes and self-catering accommodation’.

Rebecca Evans, the Minister for Finance and Local Government, said that the maximum level at which local authorities can set council tax premium on second homes and long term empty properties will increase to a maximum of 300% effective from 1 April 2023. Councils can currently charge a second home premium of up to 100%.

She also announced a change to the criteria and threshold for self-catering accommodation to be classified as non-domestic (commercial holiday lets), to amend the length of time a property is required to be actually let, increasing it from 70 days to 182 days. It will also amend the length of time a property is required to be available to let, increasing it from 140 days to 252 days.

For local taxation purposes, properties are either classified as domestic or non-domestic. Domestic properties are liable for council tax. Non-domestic properties are liable for non-domestic rates, also known as business rates.

These increases are intended to provide a clearer demonstration that the properties concerned are being regularly let as part of genuine holiday accommodation businesses, and are making a substantial contribution to the local economy.

Jane Shankland, Business Rates Director at Cooke & Arkwright commented, “I think the changes are largely well intentioned. 

“The demand from second homeowners in many rural or coastal communities can fuel house prices and result in difficulties for locals being priced out the market, but the possibility of a 300% premium for second homeowners was tougher than we had anticipated. 

“There were concerns that some second homeowners were seeking to move properties from council tax to business rates to avoid paying council tax premiums and potentially qualify for 100% relief on business rate payments. 

“The existing threshold of 70 days let and 140 days available to let was felt by many to be too low and resulted in some second homes being assessed for business rates, claiming 100% relief and making no contribution for the local services it relies upon.

“The increased threshold of 140 days let in 252 days available should ensure that only properties held as genuine self-catering properties benefit from rate relief.”

Blake Morgan committed to 29,000 sq ft office in the exciting Central Square development. We retained Ben Bolton and his team some time ago to advise and appraise options in the lead up to this significant move of our Cardiff Office. The business is extremely pleased with the outcome and Ben's negotiations and attention to detail was a major part to this.

Philip Jardine, Blake Morgan LLP