Council Tax Hikes on Second Homes: What London Landlords Need to Know About the Holiday Let Loophole

Why Are Council Tax Increases on Second Homes Causing a Shift?

Local authorities in England and Wales have been raising council tax premiums on second homes, sometimes up to 100% above the standard rate, to discourage under-occupied properties and generate additional revenue. However, new data reported by Landlord Today indicates a growing trend where owners convert second homes into holiday lets to qualify for business rates relief, significantly reducing their tax burden compared to paying council tax at the increased premium.

This trend is particularly notable in areas like the South West of England but is very relevant to landlords across London as councils adjust their second home policies. The unintended consequence is a loss of local authority income and a more complex compliance landscape for landlords.

Understanding the Tax Distinction: Council Tax vs. Business Rates

Second homes are subject to council tax, often with higher premiums applied. Holiday lets, however, can be classified as commercial properties eligible for business rates, which may be reduced or relieved under certain conditions.

To qualify for business rates relief on holiday lets, landlords must meet specific criteria:

• The property must be available for commercial letting to the public for at least 140 days per year.
• It must be let commercially for at least 70 days annually.

Failing to meet these thresholds means the property remains liable for council tax, including second home premiums.

Practical Implications for London Landlords

For Single-Unit Landlords: Review your letting patterns against the 140/70-day criteria. Casual or infrequent holiday lets may not qualify and could leave you exposed to higher council tax premiums.

For HMO and Portfolio Landlords: Properties let on a long-term basis remain under council tax exemption for tenants. Any shift toward short-term or holiday letting requires careful assessment for tax classification and compliance.

For Accidental Landlords: Those occasionally renting out a former residence should evaluate if letting periods meet business rates relief criteria or risk higher council tax bills.

What Should You Do Now?

1. Audit Your Property Use. Track how many days each property is let and available for holiday letting. Confirm if your activity meets business rates relief thresholds.
2. Review Local Council Tax Policies. Check your local council’s second home premium rates and any recent changes. London boroughs vary widely; some may have no premium, others up to 100%.
3. Consult Tax Professionals. Engage your accountant or tax advisor to clarify property classification and discuss tax liabilities and relief eligibility.
4. Prepare for Regulatory Changes. Stay informed on government consultations or policy updates targeting this holiday let loophole.
5. Communicate with Tenants and Agents. Ensure marketing and availability meet qualifying criteria and document letting periods meticulously.

Looking Ahead: Strategic Considerations

While business rates relief may appear advantageous, the government is aware of revenue implications and may tighten criteria or enforcement. London landlords should weigh operational complexity and compliance risk against potential tax savings.

How Rentals & Sales Can Support You

Our Landlord Intelligence Hub offers tailored portfolio reviews and compliance audits to help you confidently navigate these tax changes, including:

• Analysing property usage to optimise tax classifications.
• Advising on local council tax premiums and business rates relief eligibility.
• Supporting pricing strategies for holiday lets to maximise occupancy and compliance.

Contact us to schedule a consultation and ensure your portfolio is tax-optimised and compliant.

Disclaimer: This article does not constitute legal or financial advice. Landlords should consult qualified professionals regarding their specific circumstances.