Labour could be considering changes to the way holiday lets are taxed, with a newspaper report suggesting the issue may feature in next month’s Budget.
The Daily Telegraph reported that James Murray, a junior Treasury minister, confirmed the government is reviewing the tax treatment of short-term rental properties, including self-catering accommodation.
The review follows concerns that some second-home owners may be using business rates relief to reduce their tax bills.
Holiday Lets Under Review
One proposal highlighted by the newspaper is to move self-catering holiday accommodation from business rates to council tax.
The issue centres on claims that some owners are presenting second homes as holiday businesses in order to avoid paying council tax.
Under the current system, qualifying holiday lets in England are treated as small businesses for business rates purposes.
Properties with a rateable value of £12,000 or less can currently qualify for full small business rates relief if they are the only property used by the business. Properties valued between £12,001 and £15,000 can receive a reduced level of relief.
Rules Have Already Changed
The government has already introduced stricter requirements aimed at preventing second-home owners from using the business rates system simply to avoid council tax.
A property must now be available to let for at least 140 days each year and actually rented out for at least 70 days to qualify for small business rates relief.
These rules are intended to distinguish genuine holiday accommodation from properties that are being used mainly as second homes.
There are currently around 79,000 registered holiday lets in England, along with a further 8,700 in Wales.
Holiday Let Owners Could Be Affected
Any further changes could have an impact on landlords and owners who operate short-term rental properties.
The Professional Association of Self-Caterers told The Daily Telegraph that the typical self-catering business owns around 1.2 properties. It also said many are operated as a secondary source of income by working parents and retired people.
The organisation argues that holiday let businesses have already faced a significant number of government interventions in recent years.
A shift towards council tax could therefore increase costs for some owners, depending on how the final rules are structured.
Government Yet to Confirm Changes
Despite the speculation, there has been no confirmation that the government will introduce a new tax on holiday lets at the upcoming Budget.
A Treasury spokesperson told The Daily Telegraph that tax decisions are for the Chancellor to announce at fiscal events, rather than being confirmed in response to rumours or speculation.
For landlords and holiday let owners, the situation remains uncertain. However, the Treasury review suggests that the tax treatment of short-term accommodation is being examined.
Any changes announced at the Budget could have implications for the costs and viability of running holiday lets, particularly for owners who currently benefit from business rates relief.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property