A guide to council tax and business rates for holiday lets

Take a look at our handy guide for details of when to pay council tax for holiday lets and how to apply to be considered for business rates.

Council Tax

What is council tax?

This is the local tax system used in England, Scotland and Wales and the funds are used by local authorities to fund services, for example waste collection, streetlights and police.

When does this apply to holiday lets?

Council tax is charged to all domestic properties including holiday lets which aren’t classed as furnished holiday lets (FHLs). If you own a holiday let and it isn’t available for long term residential purposes, and it doesn’t meet the criteria for FHLs, then council tax will be charged.

Criteria for business rates

In England, as of the 1st of April 2023, self-catering accommodation is valued for business rates if;

• • In the last 12 months the property has been available to let commercially for short periods of at least 140 nights; and
• • The property will be available to let commercially for short periods of at least 140 nights in the next 12 months; and
• • In the last 12 months the property has actually been let commercially as self-catering accommodation for short periods of 70 nights or more

The criteria for business rates in Wales is that a property should be available to let for short periods that total at least 252 days (36 weeks) and be let for at least 182 days (26 weeks).

Valuation

Council tax amounts are based on the valuation band given to a property by the local council. The valuation band is based on the value of your property from a specific date, usually 1st April 1991.

 Who is responsible for payment

The owner of the property is usually the person responsible for payment. If the property is rented to someone else, this may make the tenant responsible depending on the terms of rental.

Exemptions/discounts

It is possible that some holiday lets may be entitled to council tax exemptions and or discounts, depending on circumstances. For example, a property which is empty or unfurnished for a certain time or properties used by students or members of the armed forces may be entitled to an exemption.

Business Rates

What are business rates?

These are payable by the owner or lease holder of a property and are taxes levied on non-domestic properties in England.

How do these apply to holiday lets

If you own a holiday let which is classes as non-domestic, including ones which don’t meet the criteria for FHLs, business rates will apply. Also, holiday lets which operate as a business pay business rates.

Valuation

Business rates are assessed by the Valuation Office agency (VOA) and are based on the rateable value of your property.

Who is responsible for payment

An owner or leaseholder of a holiday let property is the person responsible for paying business rates. At times, as part of a lease agreement, the tenant may be responsible however the responsibility will fall to the property owner.

Business rates relief and exemptions

There may be opportunities for business rates relief or exemptions such as:

Small business rate relief may apply for properties with a low rateable value, if a property is empty or for certain properties in rural areas (rural rate relief).

It is important holiday let owners in England understand the difference between council tax and business rates. Whilst council tax applies to domestic properties, business rates apply to non-domestic properties including holiday lets which are used as a business.

If you have any questions about council tax or business rates, our Owner Support team can be reached on owner.support@classic.co.uk