The Complete Guide to Holiday Let Business Rates and Council Tax 2024

Dec 3, 2024 | Finance

When it comes to managing a successful holiday let, understanding the financial side is just as important as providing exceptional guest experiences. While the allure of great earnings and glowing reviews often takes the spotlight, keeping track of your outgoings—such as business rates and council tax—is essential for long-term profitability.

In this guide, we’ll explore everything you need to know about holiday let business rates and council tax, including recent updates and how to make the most of available reliefs.

What Are Holiday Let Business Rates?

Holiday let business rates are a type of tax applied to properties used for short-term commercial letting. Similar to council tax, these rates help fund local services but are specifically designed for properties classified as commercial.

If your holiday let meets certain thresholds for availability and actual letting days, you’ll likely fall under business rates rather than council tax.

Understanding Business Rates by Region

England

Recent updates in the Autumn 2024 Budget introduced significant changes to business rates for holiday lets:

  • Discounts: From 2025-2026, self-catering properties that don’t qualify for small business rates relief will receive a 40% discount, capped at £110,000 per business.
  • Lower Multiplier: From April 2026, small businesses will benefit from a permanently reduced multiplier for calculating business rates.

To qualify, your property must:

  • Be available for short-term letting at least 140 days a year.
  • Be actually let for at least 70 days annually.
Wales

Wales enforces stricter thresholds, effective since April 2023:

  • Your property must be available for short-term letting 252 days per year.
  • It must be actually let for 182 days annually.

If these criteria aren’t met, you’ll be subject to council tax. Additionally, some councils impose premiums of up to 200% for holiday lets failing to qualify. However, Pembrokeshire plans to reduce its premium to 150% from 2025-2026.

Scotland

In Scotland, business rates apply if:

  • Your property is available for short-term letting for at least 140 days a year.
  • It is actually let for at least 70 days annually.

Additionally, Scotland’s short-term accommodation license scheme may also apply, so it’s crucial to review local requirements.

How to Calculate Holiday Let Business Rates

Calculating business rates involves two key steps:

1.Determine the rateable value of your property, as assessed by the Valuation Office Agency (VOA).

2.Apply the appropriate business rates multiplier:

•Properties with a rateable value over £51,000 use the standard multiplier.

•Properties under £51,000 use the small business multiplier, which is slightly lower.

Example Calculation:

For a property with a rateable value of £16,000 and a small business multiplier of 0.499:

•£16,000 x 0.499 = £7,984 annual business rates.

Small Business Rates Relief

Many holiday lets are eligible for small business rates relief, reducing or even eliminating liability.

  • England: Properties with a rateable value under £15,000 may qualify. Properties under £12,000 are exempt.
  • Scotland: Relief is available for properties under £20,000; those below £12,000 are exempt.
  • Wales: Relief applies to properties under £12,000, with full exemption for those under £6,000.

Council Tax vs. Business Rates

The primary difference lies in the property’s use:

  • Business rates: Apply to properties used for commercial purposes, such as short-term holiday lets.
  • Council tax: Applies to domestic properties or holiday lets that fail to meet business rate thresholds.

Note: Council tax does not cover refuse collection, which must be arranged separately by the property owner.

Furnished Holiday Lets (FHLs) and Business Rates

To qualify as an FHL and benefit from favourable tax treatment, your property must:

Be fully furnished.

  • Be available for letting 210 days annually.
  • Be let for at least 105 days per year.
  • Avoid long-term lets (over 31 days) for more than 155 days a year.

FHLs enjoy benefits like capital allowances and profit-sharing flexibility. However, with the FHL tax regime set to be abolished in April 2025, it’s vital to review any available tax reliefs before then.

Conclusion

Understanding holiday let business rates and council tax is fundamental for effective financial planning. By meeting the required criteria, leveraging available reliefs, and staying informed about legislative changes, you can ensure your holiday letting business thrives.

Need tailored advice or support for your holiday let? Get in touch with Reliance Retreats today, and let us help you navigate the complexities of holiday letting with confidence.

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