£3,000 a year: holiday let owners face council tax switch

Tens of thousands of holiday let owners could be hit with bills of up to £3,000 a year under plans now being looked at inside the Treasury. According to The Telegraph, John Healey is considering taxing holiday lets as second homes rather than as businesses, a switch that would pull properties currently treated as trading concerns into the council tax system.

The mechanics are narrow on paper and expensive in practice. At present many self catering properties are treated as businesses and assessed for business rates. One option being examined would see all self catered accommodation pay council tax instead, in the same way as any second home.

Alistair Handyside, chairman of the Professional Association of Self-Caterers, said the change would cost the average holiday let owner between £1,000 and £3,000 a year. That is not a one off charge. It is an annual bill, landing every year the property stays in use.

He also pushed back on the idea that the people affected are property tycoons. The average self catering business owns 1.2 properties, he said, and it is usually a second income, often run by working mothers or retired people who have already absorbed 25 government interventions in the past four years. The sector is already declining, he added, and many owners will decide it is simply not worth it any more.

Tourism bosses have warned that owners would be forced to sell up, with the damage spreading well beyond the cottages themselves. Handyside said holiday lets provide the bed space in parts of the country that lack the hotel capacity of London and the big cities, and that pubs, restaurants and butchers only stay in profit because of the annual influx of tourists. If those beds disappear, he warned, British families will spend their holiday money in Europe instead.

Richard Fuller, the Shadow Chief Secretary to the Treasury, told The Telegraph that Labour had already launched a £9billion business rates raid on top of its jobs tax and employer red tape. He said the Government was now looking for ways to pull more and more people into scope for what he called crippling taxes, including a holiday cottage tax, and that ministers should be cutting the welfare bill rather than squeezing taxpayers dry.

Nothing has been signed off. James Murray, the Paymaster General, confirmed in a written parliamentary answer that the Treasury is reviewing the tax treatment of short term lets such as self catering accommodation. A Treasury spokesman said the Chancellor is focused on giving families and businesses breathing space, backing British jobs and meeting the fiscal rules, and that tax decisions are set out at fiscal events rather than through comment on rumour, speculation or proposals. Separately, mayors have already been handed the power to set an overnight visitor levy, although Conservative Tees Valley Mayor Lord Houchen has said he would never raise taxes.

For ordinary households the sums are easy enough to follow. A family renting out one cottage as a second income could watch £1,000 to £3,000 vanish from it every year, and the small coastal and rural towns that live off visitor spending would feel it in their summer trade. None of this is settled, but the Treasury has confirmed it is looking, and that is usually how these bills begin.