Second Home Tax Changes in England: A Guide for Property Owners

Introduction

Owning a second home in England has become increasingly expensive, with new laws granting councils the authority to impose significant council tax premiums on certain types of properties. This guide explores the changes and provides options for second home owners to mitigate these charges.

Current Council Tax Rules for Second Homes

A property is considered a second home for council tax purposes if it is not an individual's sole or main residence. Council tax is generally due on all owned properties, regardless of their usage (holiday home, rented out, or vacant). However, tenants may be responsible for paying council tax on rented properties.

Some councils may grant council tax discounts for unoccupied holiday homes, depending on their discretion. Additionally, premiums may be imposed on properties that have remained vacant for over a year.

Changes to Council Tax Rules in April 2025

Beginning in April 2025, councils will have the power to impose a "second homes premium" of up to 100% on furnished homes not used as a main residence. This policy will also broaden the definition of an "empty home" and shorten the time frame in which a premium can be charged from two to one year.

Impact on Second Home Owners

These rule changes have significant implications for second home owners. Properties that are furnished but not actively used as a main residence may face substantial increases in council tax. Several councils have already voted to implement these changes, so it is crucial for owners to monitor their local authority announcements.

Council Tax Exemptions and Discounts

Certain circumstances may qualify second homes for tax exemptions or discounts, including:

* Job-related second homes provided by an employer
* Homes undergoing significant renovation that are uninhabitable or awaiting demolition

Switching to Business Rates

Another option to potentially reduce council tax charges is to register a second home as a business. Holiday let owners may benefit from business rate relief, which can reduce annual tax bills by up to 100%. However, specific eligibility criteria apply, including:

* Letting out the property for a minimum number of nights (70 in England, 182 in Wales)
* Advertising the property for a specific number of nights (140 in England, 252 in Wales)
* Offering short-term lettings with frequent changes of tenants

Steps to Switch to Business Rates

1. Check eligibility based on the criteria outlined above.
2. Contact the Valuation Office Agency (VOA) to notify your intention to pay business rates.
3. Complete and return the relevant form from the VOA within 56 days of receiving the initial letter.

Tax Benefits of Furnished Holiday Lets

Properties classified as furnished holiday lets may also enjoy tax savings on income tax and capital gains tax. However, the eligibility criteria differ from business rates:

* Property must be commercially let as holiday accommodation for at least 105 days a year
* Property must be available for let for at least 210 days a year

Owners of qualifying properties can benefit from capital gains relief, reducing the tax rate to 10% upon sale. They can also deduct furniture, equipment, and fixture costs from their taxable profits.