Government clamps down on tax-avoiding second homeowners

Londoners who own second homes and abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay, following new government measures announced today (Friday 14 January).

The government said the rules will target property owners who take advantage of the system to avoid paying their fair share towards local services in popular locations such as Cornwall, Devon, the Lake District, West Sussex and the Isles of Scilly.

As the rules currently stand, second homeowners in England who declare their intention to let out their property to holidaymakers can avoid paying council tax and access small business rates relief.

But, according to the government, many property owners never actually let their homes and leave them empty, unfairly benefiting from the tax break.

Following a consultation, the government has said it will introduce changes to the tax system that require second homeowners to pay council tax on properties if they are not genuine holiday lets.

From April 2023, second homeowners will have to prove that holiday lets are being rented out for a minimum of 70 days to be entitled to small business rates relief, where they meet the criteria.

Holiday let owners will be required to provide evidence such as the website or brochure used to advertise the property, along with letting details and receipts.

In addition, properties will also have to be available to be rented out for 140 days to qualify for the rates relief.

The government says that 65,000 holiday lets in England are liable for business rates, of which around 97% have rateable values of up to £12,000. Currently, there is no requirement for evidence to be produced that a property has been let out commercially.

Michael Gove MP, secretary of state for levelling up, 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.”