New business rates caps: What Rachel Reeves’s changes mean for holiday-let owners in Cornwall and Falmouth

Recent announcements from Chancellor Rachel Reeves signal a long-term shift in how business rates apply to retail, hospitality and leisure properties, including some holiday lets in Cornwall. From April 2026, temporary reliefs will be replaced by a new system of capped, tiered business-rates multipliers.

For homeowners with a holiday let in Falmouth or elsewhere in Cornwall, these changes could directly affect annual running costs, tax classification, and overall profitability.

Understanding the new caps now is essential for anyone operating or planning to buy a holiday let in Cornwall.

What are the new business rates caps?

From 1 April 2026, the government will introduce tiered business rates multipliers based on a property’s rateable value. These multipliers replace the temporary relief schemes that many holiday-let owners previously relied on.

For properties that qualify as retail, hospitality and leisure (RHL), including eligible holiday accommodation, the new system works as follows:

• Properties with a rateable value under £51,000 will be charged at a lower multiplier

• Mid-range properties will pay a higher standard rate

• Very large properties will fall into a higher band, although this rarely applies to typical holiday lets in Cornwall

For many holiday lets in Falmouth, which tend to sit below the £51,000 threshold, this could result in a more predictable and stable business-rates bill compared with previous years.

What has changed from the old system?

Until now, many holiday-let owners benefited from a temporary hospitality relief, which reduced business rates by up to 40%, subject to a cash cap of £110,000 per business.

That relief scheme ends in March 2026.

Under the new system:

• The 40% discount is removed

• The cash cap no longer applies

• Instead, any reduction is built into the lower multiplier itself

This means owners will no longer rely on discretionary reliefs that can change year to year. While this removes some flexibility, it also provides greater certainty, particularly for small holiday-let businesses in Cornwall.

Transitional relief and limits on sharp increases

To prevent sudden spikes in tax bills, the government is also introducing transitional relief.

This limits how much a business-rates bill can increase in a single year following revaluation or policy changes. For smaller businesses, increases may be capped in the first year to give owners time to adjust.

For holiday-let owners in Falmouth, this is particularly important if:

• Your rateable value changes

• You move into a different multiplier band

• You previously relied on temporary reliefs that are being withdrawn

How this affects holiday-let owners in Cornwall

If your holiday let qualifies for business rates

If your property:

• Is genuinely operated as a short-term holiday let

• Meets availability and booking thresholds

• Is correctly assessed by the Valuation Office Agency

You may:

• Benefit from the lower small-business multiplier

• Avoid council tax and second-home premiums

• Gain more predictable annual tax costs

This is good news for well-managed holiday lets in Falmouth, where year-round demand helps owners meet qualification criteria.

If your holiday let does not qualify

If your property does not meet the required thresholds:

• It may be moved back onto council tax

• You could face second-home premiums, which are increasingly common in Cornwall

• Overall annual costs may rise significantly

This makes occupancy, evidence, and proper management critical, especially in more seasonal parts of Cornwall.

Why occupancy and records now matter more than ever

Local authorities and the Valuation Office Agency are applying stricter checks, often requiring evidence that a property:

• Is available to let for at least 140 days per year

• Is actually booked for a minimum number of nights

• Is actively marketed as a holiday let

For owners in Cornwall, particularly those with properties in high-demand areas like Falmouth, maintaining strong year-round bookings is now not just about income, but about protecting tax status.

What holiday-let owners in Falmouth should do now

To prepare for the new business-rates caps, owners should:

• Check their property’s rateable value

• Understand which multiplier band applies

• Keep clear booking and marketing records

• Budget for potential changes from April 2026

• Consider whether professional holiday let management in Falmouth could help maintain compliance and income

How Guested supports holiday-let owners in Cornwall

At Guested, we specialise in holiday let management in Falmouth and across Cornwall. We help owners navigate changing regulations while maximising income.

Our local, hands-on approach supports owners with:

• Year-round pricing strategies

• Strong occupancy to meet qualification thresholds

• Clear booking records and reporting

• Proactive management as tax and policy rules evolve

Final thoughts

Rachel Reeves’s new business-rates caps mark a shift away from temporary reliefs towards a more permanent system. For many smaller holiday-let owners in Cornwall, especially those operating successfully in Falmouth, the impact may be manageable. However, owners who rely on seasonal income or fall short of letting thresholds could face higher costs.

The key takeaway is simple: consistent bookings, correct classification, and professional management are now essential for long-term success in Cornwall’s holiday-let market.

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Frequently asked questions about business rates and holiday lets in Cornwall

Do holiday lets in Cornwall pay business rates or council tax?

Holiday lets in Cornwall can be charged business rates or council tax, depending on how the property is used. To qualify for business rates, a holiday let must be available to let for at least 140 days per year and actually let for a minimum number of nights. If it does not meet these thresholds, it may be moved back onto council tax and could be subject to second-home premiums.

What are the new business rates caps for holiday lets?

From April 2026, temporary reliefs will be replaced by tiered business-rates multipliers based on a property’s rateable value. Smaller qualifying holiday lets will benefit from a lower multiplier, while larger properties will pay a higher rate. This replaces the previous 40% relief scheme, which was capped at £110,000 per business.

Will holiday lets in Falmouth be affected by the new caps?

Most holiday lets in Falmouth have a rateable value under £51,000, meaning they are likely to fall into the lowest multiplier band if they qualify for business rates. Thanks to strong year-round demand, many Falmouth properties are better placed than other Cornish locations to meet letting thresholds and retain business-rates status.

What happens if my holiday let doesn’t qualify for business rates?

If a holiday let does not meet the required availability or booking thresholds, it may be reclassified for council tax. In Cornwall, this can result in significantly higher annual costs, particularly where second-home premiums apply. Maintaining consistent bookings and clear records is essential to avoid this.

Are business rates increasing for holiday lets?

Business rates are not increasing across the board, but the way they are calculated is changing. Some owners may pay less under the new lower multipliers, while others could pay more if they lose reliefs or move into a higher valuation band. Transitional relief will limit sharp increases in the short term.

Does owning a holiday let in Cornwall still make financial sense?

Yes, particularly in locations like Falmouth, which benefits from year-round demand driven by the university, marine industry, events, and strong transport links. However, profitability now depends more heavily on occupancy, pricing strategy, and professional management than in previous years.

How can I protect my holiday let from higher taxes?

Holiday-let owners can reduce risk by:

• Maximising year-round occupancy

• Keeping clear booking and marketing records

• Monitoring rateable value and classification

• Using professional holiday let management in Cornwall to stay compliant

Can a holiday let management company help with business rates?

Yes. A professional holiday let management company can help ensure your property meets letting thresholds, maintains strong occupancy, and keeps the documentation required for business-rates classification. This is particularly valuable in areas like Falmouth, where year-round demand can be maximised with the right strategy.

Why does Falmouth outperform other parts of Cornwall for holiday lets?

Falmouth benefits from:

• A large university with year-round visitors

• A global marine and maritime industry

• Regular cultural and sailing events

• Strong food and hospitality scene

• Direct rail links

• High off-season demand

This makes holiday lets in Falmouth less seasonal and more resilient to tax and regulatory changes.

Should I use Airbnb management in Falmouth?

For many owners, professional Airbnb management in Falmouth helps increase occupancy, protect tax status, and improve profitability. As regulations tighten, expert local management can make a significant difference.