New business rates thresholds for holiday lets could have unexpected impacts for owners warns finest retreats

  • Owners of English holiday lets may not be aware of full impact of upcoming changes to minimum thresholds
  • Increased thresholds are retrospective which could create unexpected financial implications for English holiday let owners

The UK’s Valuation Office Agency has issued a reminder that changes to eligibility rules for self-catering properties will come into effect from 1st April 2023. However, the increased thresholds will actually be looked at retrospectively, meaning holiday let owners could face significant, unexpected financial impacts.

Currently, holiday lets in England only need to be available for commercial letting for 140 days or more over the year to qualify for business rates.

As of 1st April 2023, holiday lets in England must be available for commercial letting for a total of 140 days or more in the current and previous year. The major change is that the property must have also been actually commercially let for 70 days in the previous 12 months - meaning the thresholds are being applied retrospectively.

Richard Bond, Founder of Finest Retreats, warns, “Many owners may not be aware that the new thresholds don’t just apply to the 23/24 tax year but that they will actually have had to meet the new thresholds within the 22/23 tax year in order to continue to qualify for Business Rates.”

“Not only could this retrospective evaluation take some holiday let owners by surprise but it could also have significant financial impacts on them if they are suddenly switched from Business Rates to Council Tax charges.”

“Whilst we welcome tax premiums on empty second homes, which have little benefit to local economies, it seems unfair that holiday let owners are expected to have met the new thresholds in the previous tax year without knowing about the increased requirements.”

“Holiday let properties very much operate as small businesses within the UK’s tourism market and, when professionally marketed, can provide six times more income for the local economy**. But, following our own research, we are aware increased taxations could see holiday rental owners exit the market - which would have a detrimental effect on their surrounding local economy.”

“Whilst increased thresholds and taxations encourage owners to professionally market properties for holiday lettings, it is important increased requirements do not push small holiday lets out or into financial difficulty, if they’ve had a bad season due to reasons outside of their control.”

Increased minimum requirements could have detrimental impacts on holiday let owners and local economies

72% of holiday let owners surveyed indicated they are likely to withdraw from the market if taxes and restrictions aimed at second homeowners also apply to them, according to a OnePoll survey* commissioned by Finest Retreats.

Bond continued, “With the new thresholds retrospectively reviewing booking data, some holiday let owners may be forced out of the market as they face unexpected, significantly higher tax costs. With holiday lets contributing significantly to local economies, this could have knock-on effects to other local businesses in the area, as those tourists who would have eaten in local restaurants, shopped at local stores and visited surrounding attractions are no longer there.”

Regionalised economic data released by Finest Retreats has showcased how fully-managed holiday lets can generate up to six times as much spend per property per year as a second home and up to three times as much as an owner-occupied property**.

Bond concludes, “It’s important that holiday lets can continue to operate as small businesses and that the support they provide to local businesses can continue - especially during this turbulent financial time.”

“We’d encourage holiday lets owners - and second homeowners - to let their properties out through a professionally managed channel to maximise the benefits for all, but also encourage the government to ensure that quick-changing regulations don't force owners out.”

Source: www.owners.finestretreats.co.uk/holiday-lets-are-not-second-homes

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