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Holiday Home Council Tax

Owning a holiday property, whether it’s your second home or you run it as a holiday let business, will mean you are responsible for paying tax to the relevant authorities. But, different types of holiday accommodation are treated differently for tax purposes, so it’s important to understand what the distinction is between holiday home council tax and holiday let business rates.

For clarity on which you apply to your situation, read on for answers to frequently asked questions on holiday home council tax and holiday let business rates.

Click on the quick link below to skip to a particular topic or read on to discover all you need to know about holiday home council tax:

What is the difference between holiday home council tax and holiday let business rates?

If you own a property, be it a holiday home that you and your family use, or a self-catering accommodation that is rented out to guests, you will need to pay either council tax or holiday let business rates for your property.

The revenue raised will go to help fund vital local services like refuse collection and road maintenance in the area where your holiday let, or 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.
  • Business rates are a local tax that is paid on properties that are being used commercially rather than domestically, in the same way that council tax is a tax on domestic properties. A holiday let will fall under this taxable bracket.

Do I need to pay council tax on my holiday home?

Holiday home in East Prawle

Yes. If you own a holiday cottage, which is used predominantly as your second home and isn’t let out commercially, you will need to pay council tax. Working out your council tax on your holiday property will be dependent on the valuation band that it falls in and what the local council charges for that band.

Click here to check your council tax band for your holiday home and what amount of tax you have to pay.

You may pay less council tax for a property you own or rent that’s not your main home. Councils can give furnished second homes or holiday homes a discount of up to 50%. Contact your council to find out if you can get a discount – it’s up to them how much you can get.

Must I pay council tax on my holiday let business?

No. If your holiday home is classified by HMRC as a Furnished Holiday Let Business which is run commercially, you no longer need to pay council tax on the property, but instead, you’ll be liable to pay business rates on your holiday let.

When do I have to pay business rates on my holiday let?

Aerial view of holiday let business

If you are running your holiday cottage as a self-catering business rather than just your own holiday accommodation, it is likely that you will be subject to paying business rates rather than council tax.

If you make your property available for short-term letting periods 20 weeks (140 days) or more per year, it should then be registered for business rates rather than council tax.

For an in depth look at whether you qualify as a furnished holiday let business and subsequently for paying business rates, read our guide to holiday homes, tax and all things in between.

Are business rates cheaper than council tax?

Keep in mind that if your property is subject to business rates, you will no longer be required to pay council tax – this can be beneficial as business rates can work out cheaper than council tax!

There are certain holiday let tax reliefs that you can benefit from, as well as other advantages for properties that qualify as furnished holiday lets.

How are business rates calculated for holiday lets?

Business rates vary from property to property. Your holiday let business rates will be calculated according to certain attributes. These range from your holiday homes size and how many people it can accommodate, to where it is located and its annual turnover.

The amount payable is dependent on your property’s rateable value, which is calculated by the Valuation Office Agency (VOA). Generally, the bigger and more successful your holiday homes business is, the higher the rateable value.

The government has an online tool you can use to check the VOA’s check the rateable value for your holiday property.

What benefits are available to me as a holiday let owner?

furnished holiday let (FHL) - holiday home with furniture

If your property qualifies as a furnished holiday let, it is classed as a business and there are various benefits available.

The great news is that business rates are classified as an expense and can be deducted for tax purpose.

In addition to this, your business rates bill will be reduced if your property is eligible for small business rates relief. This means that if your property has a rateable value of £12,000 or less, you won’t have to pay any business rates. Or, if it falls between £12,001 to £15,000, the rate relief will go down gradually from 100% to 0%.

At Helpful Holidays, our team of holiday letting experts are on-hand to offer advice on all aspects of holiday letting, from holiday let business rates to information on tax implications and the benefits of owning a holiday home.

We’re happy to answer any holiday letting queries you may have, so to find out more about letting with Helpful Holidays, request your FREE owners guide today or call our team of experts on 01647 403014 today.

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* At the time of writing Helpful Holidays has taken all reasonable care to ensure that the information contained in this article is accurate. However, no warranty or representation is given that the information is complete or free from errors or inaccuracies. Generic information is contained within this article and each individual’s tax affairs are different, further advice should be sought from an accountant.