Unlock the Editor’s Digest at no cost
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
A rising variety of vacation owners letting out their properties are transferring to pay enterprise charges to keep away from sharply rising council tax payments.
There have been 78,000 vacation lets registered for enterprise charges on March 31 2024, up from 63,000 in 2020, in keeping with evaluation by property agent Hamptons. However the variety of properties answerable for second properties council tax — recorded at October annually — has stayed at 263,000 over the 4 years.
Council tax on second properties goes up in lots of vacation spots, the place policymakers fear the demand for housing is pushing up costs and locking native individuals out of the market.
On prime of tax rises already imposed by councils, they may be capable to cost a 100 per cent premium on second or empty properties. These planning to impose these rises embrace Bathtub and North East Somerset, East Devon and North Norfolk, all second residence hotspots.
The attraction of transferring to the enterprise charges system from council tax is that usually properties fall under the edge at which any cost is due. These claiming small enterprise charges reduction with a rateable worth of lower than £12,000 qualify for a 100 per cent low cost.
These with a number of properties can solely declare the reduction on certainly one of them. However assuming every proprietor solely has one property registered for enterprise charges, some 96 per cent of vacation permits England fall under the edge at which they should pay charges, Hamptons calculated.
The variety of properties taking over enterprise charges has already grown in hotspots equivalent to Cornwall (up 32 per cent between 2020 and 2023), Northumberland (34 per cent), and Dorset (27 per cent).
However Hamptons warned councils have been dropping out because of this. Since October 2019, Cornwall authorities have been 6 per cent down on their second residence tax receipts.
“Many of the councils imposing council tax premiums will discover themselves worse off,” stated Aneisha Beveridge, analysis director at Hamptons. “Including premiums to council tax with out reform of the broader enterprise charges system in all probability isn’t the reply to curbing the variety of vacation lets.”
If vacation let house owners have been to promote up, simply 4 per cent of them suppose an area individual would buy it, in keeping with a survey of 500 buyers this 12 months by vacation rental company Sykes Cottages. Demand additionally stays strong: half of homeowners have been doubtless to purchase one other vacation let within the close to future, regardless of the federal government’s reforms.
Nonetheless, operating a house that qualifies for enterprise charges reduction is a really totally different proposition from holding a second residence primarily for household and associates.
Dean Lonergan, director on the Cornwall workplace of property agent Jackson-Stops, says: “Anyone might need a vacation cottage and use it, say, eight to 12 weeks of the 12 months themselves — making it accessible for vacation lets the remainder of the time. You discover these are those at present paying council tax, who will in all probability look to change it. The complication for switching [to rates] is that it’s bought to be bodily let.”
There are strict standards to qualify for enterprise charges. Self-catered properties in England will need to have been accessible for hire for 140 days of the earlier 12 months and really let for at the least 70 days; in Wales, they will need to have been accessible for 252 days and rented for 182.
Whereas this can require extra work on the a part of house owners, there’s an upside for the broader market, Beveridge stated. “It should imply properties that have been beforehand empty for a lot of the 12 months will in all probability be used extra intensely by guests.”
