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Categories: prs | tax

The government has put a stop to the plans of various local authorities that aimed to double the council tax on second homes and some vacant properties starting from April 2024, which will cost local authorities up to £93 million annually.

These policies were only going to be implemented if the government granted local authorities powers through the Levelling up and Regeneration Bill currently under consideration by Parliament.

However, the bill needs to be given Royal Assent by April 1, 2023, to implement the change in 2024, but the government has delayed the bill in order to make additional changes.

As a result, local authorities will have to wait until 2025 to impose the higher council tax burden.

Deputy leader of Dorset, Peter Wharf, states:

“The proposal to introduce council tax premiums on second homes and empty properties continues to be something we are keen to explore … We will watch the progress of the government’s new Levelling Up and Regeneration Bill closely and bring this to Full Council once the legislation has passed.”

He continued:

“It appears that the Bill that would enable us to bring in a premium on second homes council tax with effect from 1 April 2024 will not be passed into law [in time]. While we are looking at ways to remove this as an issue it is looking very much as if we will not be able to introduce this extra tax until 2025/26.”

Delay will cost about £93 million in potential income for local councils

Second homes and holiday lets have been a point of contention in many tourist areas of the UK, with concerns that they can drive up house prices and limit the availability of affordable housing for local residents. The introduction of a council tax premium is seen as a way to address these issues and generate additional revenue for local councils.

However, the delays to the passage of the Levelling Up and Regeneration Bill mean that many councils will have to wait longer than expected to introduce the premium and potentially miss out on significant income, whilst saving landlords additional expense in the meantime.

Cornwall Council, North Yorkshire Council and Westmorland & Furness Council had planned to take up the provision but will now miss the opportunity to raise £25m, £14m and £10m, respectively.

Due to delays, some councils have expressed concern and decided not to commit to the premium.

This has led to frustration among some council leaders and MPs, who argue that the government should be doing more to prioritise the passage of the bill.

The delay has been criticised by MP Tim Farron for the lack of urgency from the government.

New rules for holiday lets

Separately to this, in England and Wales, new regulations regarding holiday rental properties have come into effect.

These regulations may compel many owners to pay council tax instead of business rates.

For a self-catering property in England to qualify for business rates, it must be commercially available for short-term rentals for 140 nights or more in the previous and current year, and it must have been commercially let for at least 70 nights in the previous 12 months.

Properties in Wales are only eligible for business rates if they are available for commercial rental for short periods totalling 252 nights or more in the previous and current year and have been commercially let for at least 182 nights in the previous 12 months.

The Valuation Office Agency (VOA) examines whether the property was occupied before midnight on a specific night to determine whether it was rented out. This means that if a property was rented from Friday night to Sunday morning, it would be considered rented for two nights under the self-catering criteria.

These new rules only apply to properties designated as self-catering holiday lets within the short stay accommodation category in popular tourist destinations.

VOA will use a “Request for Information” form to verify that self-catering properties meet the eligibility standards. This form will be distributed at different periods during the 2023-2024 operating year as part of an ongoing program.