Bank Accounts for Holiday Homes
New to holiday letting or looking to buy a holiday home in the West Country? We understand that holiday...
Owning a holiday home, whether it’s for your own use or run as a holiday let business, will mean you need to pay tax to the relevant authorities.
However, the way your tax is calculated and the amount due will depend on whether your holiday let is subject to council tax or business rates.
In this detailed guide, we’ll explain the difference between holiday let council tax and business rates, which tax you’ll need to pay, and how to save money on your tax bill.
Use the quick links below to skip to a particular topic or read on to discover all you need to know about holiday home council tax and business rates:
If you own any property in the UK, you will need to pay either council tax or business rates on your property. This is true for holiday homes as well, with which one you pay depending on how much your holiday home is let.
These taxes are paid to your local district council or unitary authority, rather than HMRC. The revenue raised will help fund vital local services like refuse collection and road maintenance in the area where your holiday home is located.
Council tax is an annual fee charged by the local council on residential or domestic properties. As with any residential property, a holiday home which is mainly for personal use will be included in this category.
This is often a more expensive option than business rates, especially with second home council tax premiums introduced by some councils.
Business rates are a local tax that is paid on properties that are being used commercially rather than domestically, for business purposes. A holiday let will fall under this taxable bracket if it meets certain letting days criteria.
The cost of paying business rates is likely to be less than council tax, as it avoids second home premiums. Owners can also benefit from Small Business Rates Relief, which is explained later in this blog.
For a holiday let in England or Northern Ireland to qualify for business rates rather than council tax, it must meet the following criteria:
If your holiday let is in Wales, the rules are slightly different. If the property is in Wales, the minimum available letting days are 252 and the property needs to be actually let for 182 days.
If you own a holiday home which isn’t let to paying guests or doesn’t meet the criteria above, you will need to pay council tax.
Working out the council tax on your holiday home will depend on the valuation band that it falls into, the amount your local council charges for that band, and whether a second home council tax premium is charged.
Generally, business rates will work out cheaper than council tax. This is due to two main reasons: The avoidance of a second home council tax premium, and the availability of Small Business Rates Relief.
Councils in England are allowed to charge second homes a premium of up to 100%. However, how much they charge, or even whether they charge a premium at all, is up to the local council.
For example, many councils in Devon charge a 100% premium, meaning second home owners effectively pay double council tax. Cornwall council takes the same approach.
In Wales, councils can charge a second home premium of up to 300%, although few councils have opted to charge the maximum amount.
To find out the council tax rules for holiday lets in your area, contact your local authority or visit their website.
Many holiday lets registered for business rates could also be eligible for small business rates relief. This is a scheme which allows small businesses a reduced business rates bill, providing they only have one property and it has a ‘rateable value’ less than £15,000.
If your property has a rateable value of £12,000 or less, you will be eligible for 100% relief, meaning you won’t have to pay any business rates.
If the rateable value falls between £12,001 to £15,000, the rate of relief will go down gradually from 100% to 0%.
For more tips on other holiday letting taxes you may encounter, read our holiday let tax guide. To learn more about saving money while letting a holiday property, read our blog on holiday let costs.
Your holiday let business rates will be calculated based on the property’s rateable value, which depends on various attributes. These range from your holiday home’s size and how many people it can accommodate, to where it is located and its annual turnover.
Rateable value is calculated by the Valuation Office Agency (VOA). Generally, the bigger and more successful your holiday home business is, the higher the rateable value.
The Government has an online tool you can use to check the VOA’s rateable value for your holiday property.
Once you have this, you can use the Government’s guide to help you calculate your business rates bill, using the ‘multiplier’ that applies to you.
Tax can be a complex subject and differs per individual case, so we always recommend you seek professional advice.
We have teamed up with Zeal Tax, who offer a free tax helpline for Helpful Holidays owners. For tax-specific queries, contact Zeal on 01633 499771, email sykesfamily@gozeal.co.uk or visit www.gozeal.co.uk/sykesfamily.
At Helpful Holidays, our team of holiday letting experts are on-hand to offer any advice on all aspects of holiday letting, from cleaning and changeovers to starting a glamping business.
To learn more about letting with Helpful Holidays, complete the form below. Our team will be in touch to answer any questions, and you’ll receive a copy of our FREE Owner Guide.
Please Note: The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA.
As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.
Discover how a local brand with national reach can work for you. With nearly 40 years of letting experience, we pride ourselves on delivering the bookings you deserve.