As the cost of living continues to bite, many holiday homeowners are making a switch, turning their backs on ever-increasing council tax bills and opting for the business rate system instead.

A Growing Trend

According to estate agents Hamptons, 78,000 holiday lets were registered for business rates on March 31st 2024 – a significant jump from the 63,000 registered in 2020. This is happening while the number of homes liable for the second homes council tax remains static at 263,000. This trend shows that a growing number of holiday let owners are choosing the business rate system over council tax.

Why the Shift?

The allure of the business rates system lies in its potential for big savings. Many properties fall below the threshold at which any rates are even due. Properties with a rateable value of less than £12,000 qualify for a 100% discount on business rates. This means that, in many cases, holiday let owners are effectively paying nothing at all.

The Impact on Councils

This shift, however, is leaving councils with a hefty price tag. Cornwall, for example, has seen a 6% drop in their second home tax receipts since 2019. Experts warn that this trend could be a significant blow to councils’ finances.

The Big Question: More Visitors, Less Local Homes?

The move towards business rates is likely to mean more intense use of holiday homes, as owners will need to rent them out for at least 70 days of the year to qualify for the relief. However, this could come at the cost of less housing available for local residents. A recent survey found that only 4% of holiday let owners believe their property would be bought by a local person if they were to sell. This suggests the shift could contribute to the housing shortage experienced in many popular holiday destinations.

What’s Next?

The future of holiday lets in the UK is uncertain. While councils are trying to curb the number of holiday lets through council tax premiums, the business rates system offers a tempting alternative for many owners. It remains to be seen whether the shift will benefit the wider market, with increased tourism, or exacerbate the housing crisis in some areas.