Second homes face further tax pressure – is it time to move onto business rates?

2 days ago

6 min read

Second homes are once again under the political spotlight, with Labour considering further property-tax measures alongside the higher Council Tax charges already introduced across many parts of England.

For holiday-let owners in Cornwall, the direction of travel is clear: properties treated simply as second homes are likely to face a growing tax burden. However, a genuine, commercially operated holiday let may qualify for business rates instead – and, in many cases, the amount ultimately payable can be £0.

Second homes and holiday lets are not necessarily the same thing

A second home is generally a furnished property that is not someone’s main residence. A commercial holiday let, meanwhile, is a property actively marketed, booked and operated as a business.

That distinction matters.

Cornwall Council introduced a 100% Council Tax premium on second homes from 1 April 2025. This means an affected property can be charged twice the normal Council Tax bill. A property with a standard annual bill of £2,500 could therefore face a bill of approximately £5,000.

With the Government continuing to examine how second homes and higher-value properties are taxed, owners should make sure their property is in the correct rating system. A genuine holiday-let business should not necessarily remain registered as an ordinary second home indefinitely.

What are Labour’s plans?

The precise shape of future property taxation remains subject to political decisions, consultations and future Budgets. Reported proposals have included placing a greater burden on second homes and higher-value properties, while councils have already been given greater power to apply Council Tax premiums.

Not every proposal will necessarily become law in its original form. However, the wider policy direction is difficult to ignore: retaining a property primarily for private use is becoming more expensive, particularly in areas with housing pressures such as Cornwall.

For owners who genuinely operate their property as a holiday-let business, this provides another reason to understand the business-rates system and apply as soon as the qualifying conditions have been met.

When does a holiday let qualify for business rates?

In England, a self-catering property should be assessed for business rates when all of the following conditions apply:

It is let commercially for short periods of 28 nights or fewer.
It was available to let commercially for at least 140 nights during the previous 12 months.
It was actually let commercially for at least 70 nights during that period.
The owner intends to make it available commercially for at least 140 nights during the following 12 months.

These are national rules rather than conditions created by Cornwall Council. If a property meets them, the owner must apply to the Valuation Office Agency to have it assessed for business rates. The full eligibility requirements are explained in the Government’s guidance for self-catering and holiday-let accommodation.

Importantly, the 70-night test relates to nights actually let, not the number of separate bookings. For example, ten seven-night stays would amount to 70 nights.

Owner stays, complimentary stays and periods when the property was not genuinely available to the public will not normally count as commercial lettings. Owners should therefore retain accurate calendars, booking confirmations and payment records.

Why can business rates be so beneficial?

Business rates are not calculated using the property’s market value. The Valuation Office Agency assigns a separate rateable value based on factors including the property’s type, size, location, quality and its likely letting income.

Many individual holiday lets have a rateable value of £12,000 or below.

Under the current Small Business Rate Relief rules, an eligible business occupying only one property pays no business rates when its rateable value is £12,000 or less.

That can mean:

No ordinary Council Tax.
No 100% second-home Council Tax premium.
No business-rates payment after Small Business Rate Relief is applied.

Properties with a rateable value between £12,001 and £15,000 may receive tapered relief. The relief gradually reduces from 100% to zero as the rateable value approaches £15,000. The Government explains the thresholds in its Small Business Rate Relief guidance.

This can represent a considerable annual saving for an eligible owner. It is not a loophole: it is the rating system designed for qualifying commercial accommodation businesses.

Does every property under £12,000 automatically receive a £0 bill?

Not necessarily.

Small Business Rate Relief usually depends on the business occupying only one property. Different rules can apply where the same ratepayer operates multiple properties, although limited relief may still be available in some circumstances.

The property must also be formally entered onto the business-rates list. Meeting the letting thresholds does not automatically change the account – an application must be made, the Valuation Office Agency must assess it, and the local authority must apply any available relief.

Owners should therefore avoid assuming that business rates will always be nil until the formal assessment and relief decision have been received.

Can previously paid Council Tax be refunded?

Potentially, yes.

When the Valuation Office Agency moves a qualifying property from the Council Tax list to the business-rates list, it will give the change an effective date. If that date is backdated, the Council Tax account should normally be recalculated from that point.

Where this creates a credit because Council Tax has already been paid for the same period, the owner may be entitled to have that credit refunded or transferred. If Small Business Rate Relief also reduces the business-rates bill to zero, the result can be a substantial repayment.

However, a refund is not guaranteed simply because an application has been submitted. It depends on:

Whether the Valuation Office Agency accepts that the property qualified.
The effective date it assigns.
The amount of Council Tax already paid.
Whether Small Business Rate Relief is granted.
Whether any other money remains due on the account.

Owners should continue paying existing bills while an application is being considered unless the council confirms otherwise. Any necessary adjustment can then be made once the property’s status has formally changed.

What evidence should owners keep?

A business-rates application may require evidence showing that the property was genuinely available and actually let. Useful records include:

Booking calendars from Airbnb, Booking.com or a property-management system.
Direct-booking confirmations.
Guest invoices and payment records.
Dates the property was advertised.
Owner-blocked dates.
Cancellation records.
Evidence of marketing through a website or booking platforms.

Good record-keeping is particularly important because eligibility is based on the previous 12 months of trading, not simply the owner’s intention to operate a holiday let.

Once a property is registered for business rates, owners may also be asked to confirm each year that it continues to satisfy the criteria. If it stops qualifying, it can be returned to the Council Tax list.

Business rates are about genuine commercial operation

Moving onto business rates should not be viewed as a paper exercise. The property must be actively marketed and achieve at least 70 commercially let nights.

That is one reason professional management can be valuable. Strong photography, sensible pricing, multi-platform distribution, direct bookings and active calendar management can help a property reach the required occupancy while also improving its overall return.

For owners already operating successful holiday lets, the business-rates rules simply recognise the commercial reality of how the property is being used.

The time to review your position is now

With Cornwall’s 100% second-home premium already in force and further taxation of second homes remaining firmly on the political agenda, owners should not wait for another large bill before checking their position.

If your holiday let has been commercially available for at least 140 nights and actually let for at least 70 nights during the past 12 months, it may now qualify for business rates.

For many individual properties with a rateable value of £12,000 or less, Small Business Rate Relief can reduce the bill to nothing. Where the change is backdated, Council Tax already paid for the relevant period may also be refundable.

Every property and ownership arrangement is different, so owners should confirm their position with the Valuation Office Agency, Cornwall Council or a suitably qualified adviser.

At Guested, we help owners maintain accurate booking records, monitor occupancy and operate their properties as genuine, professionally managed holiday-let businesses. If you would like us to review your property’s booking history and check whether it appears to meet the business-rates letting criteria, please get in touch.