Second home tax policy costs councils £383m annually

Government efforts to raise council tax on second homes are backfiring and costing local authorities an estimated £383m a year, analysis shows. 

Business rates firm Colliers has published new research that shows the double council tax policy is prompting owners to reclassify properties as holiday lets. 

Under current rules in England, properties let for at least 140 days a year can be classed as businesses, with full relief available for lower-value homes. 

Colliers estimates more than 77,000 holiday lets will qualify for full business rates relief in 2026/27, up from just under 74,000 last year.

The South West is the worst affected region, where nearly 23,000 properties pay neither council tax nor business rates.

In Cornwall alone, more than 11,000 homes fall into this category, costing an estimated £59m a year in lost revenue. In North Yorkshire, 5,910 properties are also exempt, costing around £30m. 

John Webber, head of business rates at Colliers, said: ‘The figures show the short-sighted policy of trying to extract money from those with second homes is backfiring. They indicate that introducing higher council tax on second homes is simply encouraging more owners to ‘flip’ into the business rates system.’

‘Although tighter measures are in place than in the past, they do not prove a strong enough deterrent to stop second home owners from flipping their properties into the Rating List and avoid paying the tax, particularly in England, where owners only need to let out their property for 10 weeks of the year,’ he continued.

Against this backdrop, Colliers is calling for a full overhaul of council tax and business rates. 

Webber added: ‘The fact that the numbers doing this are increasing shows that these ridiculous short-sighted policies are not working. Offering either double taxation or no taxation at all is not a sustainable approach. It distorts behaviour and undermines the ability of local authorities to raise vital funds. It certainly isn’t funding affordable housing for locals.’

Image: Call Me Fred/UnSplash 

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