Council Tax Changes for Second Homes: What Property Investors Need to Know
Property investors now face council tax changes that affect second homes. The tax rules now tie the extra cost to each property. Homeowners see the tax rise when the home is not their main residence. This change will matter for those who invest in HMOs or other property types.
Understanding the Council Tax Premium
Local authorities can now add a council tax premium to second homes. This new rule works from early 2024. A home that is only briefly furnished and not used as a main residence gets marked as a second home. The tax bill may end up twice as high for these properties. For example, a bill may grow from about £2,171 a year to close to £4,342. This rule helps local areas that face housing shortage, as many local residents struggle with home costs. Research by Local Government Chronicle in 2024 shows councils could collect over £100 million a year. These funds help pay for community resources and services.
Changes Manifesting Across England
Over 150 local councils plan to use this council tax premium. Investors with properties in busy tourist areas must check local policies carefully. Councils in places like Bath and North East Somerset, East Devon, and North Yorkshire have set these rules. It is wise for property owners in these regions to review the local tax policies.
Investors see that higher tax costs can change property values. Websites such as Zoopla note that property prices might fall in areas once popular with tourists and second home buyers.
What Qualifies as a Second Home?
A second home means a property that is furnished but is not a person’s main residence. Confusion may come up over how some properties are marked. One case, reported by the BBC, shows a property in Pembrokeshire that saw its tax triple, even though the owners could not use it. When investors get a tax bill they did not expect, they should talk with their local council or the Valuation Office Agency. They can check if the tax mark on the property is correct.
Distinctions Within Property Types
Property owners also need to know the different tax rules for different homes.
Buy-to-Let Properties
In buy-to-let homes, tenants normally pay the council tax. This means many investors do not pay the extra tax. If a property is marked as an HMO, the owner must pay the tax. HMO owners must think ahead when they calculate their costs.
Empty Homes
Empty homes that sit off the market can face a higher tax rate. The longer a home stays empty, the higher the extra tax goes. In some cases, the extra tax can be as steep as a 300% increase. This rule pushes owners to sell or rent the property faster.
Holiday Lets
Holiday lets count as a different type of property. These furnished homes do not get the council tax bill. Instead, they pay business rates, which may be lower. To get this status, the property must be let for short periods. It must be available for at least 140 days each year and rented for 70 nights across England and Scotland.
Strategies to Manage or Avoid Additional Charges
Investors who worry about the higher tax rates can choose to change how they use their property. One choice is to convert a property into a holiday let so that council tax does not apply. Another choice is to sell when the tax cost grows too high. It is best to keep an eye on new rules and adjust plans when needed.
Exemptions from Council Tax
Some exemptions exist. When a property is under long renovation or is inherited, the owner might not pay council tax for a set time. Detailed guidance is available on the UK Government website. Here, it explains how to check and challenge property tax marks.
Conclusion
New tax rules set for April 2025 will affect many second homes. Property investors must check their responsibilities and plan for possible cost rises. With tax rules changing and home prices shifting, staying informed and ready is key to making smart choices in the property market.
Additional Resources:
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