A rule that lets second-home owners avoid council tax if they let their property for 10 weeks is now costing government nearly £400 million a year, according to commercial real estate company Colliers.
Last year, Colliers said there were 73,838 holiday-let properties eligible for 100% business rates relief, costing the public purse £334 million. For 2026/27 that has risen to 77,241, and an estimated £383 million loss, Colliers claims.
The company blames the rise on what John Webber, its head of business rates, says is a short-sighted policy of trying to extract money from those with second homes by imposing higher council tax on them, thereby encouraging them to ‘flip’ into the business rates system.
This is particularly bad in the south west of England, says the firm, and most acute in Cornwall, where 11,450 properties are now paying neither council tax nor business rates, costing the local authority nearly £60 million a year. But it is significant elsewhere, for instance in Yorkshire, where Colliers say £30 million has been lost this year.
The rule says a second property can be classed as a business if the owner makes it available as a holiday let for 140 days in a year, and it is let for at least 70 days. As a small business, the owner can then elect to pay business rates instead of council tax and claim 100% relief on them if the rateable value is less than £12,000. Properties with a rateable value between £12,000 and £15,000 can claim on a sliding scale.
The rules in Wales say the property must be a self-catering unit available for let for at least 252 days and actually let for at least 182 days.
Webber said most people would happily pay what they had to, “but the politics of envy is forcing people to move to business rates once they meet the criteria – the government policy means they will then pay nothing. We blame the government for this, not people with second homes.
“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.
“Blaming second-home owners for the inability of politicians of all parties to build sufficient social housing for a generation and then trying to use the tax system to penalise them is not only short sighted, it is actually raising less money. ”
