Second home owners and property investors could face a shock when council tax bills start to arrive this month as local authorities can now charge thousands more for additional properties.
Laws which came into force in early 2024 mean local authorities can charge a council tax premium of up to 100% on second homes, provided the property is not a main residence. Councils are required to give homeowners a year’s notice.
It is another blow to property investors who are already facing higher stamp duty costs and restrictions on mortgage interest relief for buy-to-let.
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Council tax statements tend to arrive in March and the new charges start in April so many property investors and owners of second homes could see their costs rise from next month.
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It is suggested that the average bill for a second home could rise from around £2,171 to £4,342 per year.
The idea behind the change is to free up housing stock in second home hotspots for locals who may have been priced out of the area due to tight supply.
Reports suggest more than 150 local authorities will impose the premium, particularly in holiday home hotspots.
Cornwall, South Hams and Cumberland are just three examples. South Hams is the home of popular seaside destination Salcombe, while Cumberland boasts the natural beauty of the Lake District.
Research from the Local Government Chronicle indicates that the council tax premium could raise over £100 million a year for councils.
Similar laws have already rolled out in Scotland and Wales. In Scotland, councils can charge up to double the full rate of council tax on second homes. In Wales, the premium can be as much as 300%.
Property website Zoopla has previously indicated that council tax changes could be having a negative impact on house prices in some coastal and rural postal areas.
It comes as council tax bills are also set to rise by up to 10% in some areas for people owning their own residential property.
How can I find out if the council tax premium will apply in my area?
Many councils have already voted in favour of increasing council tax on second homes. These include Bath and North East Somerset Council, East Devon District Council, North Norfolk District Council, North Yorkshire Council, and more.
You can find out if your local council has voted to bring in the changes by checking their website. It is particularly important to check for changes if you live in a popular holiday area, such as the South West.
To find which local authority you're served by, put your postcode into this government portal and it will direct you to the relevant website.
Which types of property face second home council tax?
A property is generally considered to be a second home if it is furnished but isn't classed as someone's main residence. However, there have been reports of confusion in some council areas about what a second home actually is.
Last year, the BBC reported that a wooden hut in Pembrokeshire had seen its council tax trebled despite not being considered habitable. The toiletless shack had been deemed to be substantially furnished by Pembrokeshire County Council, leaving its owners with a £4,000-a-year tax bill.
If you get an unexpected second home tax bill for a property you consider to be exempt, it is worth contacting your local council and the Valuation Office Agency – the government body that supports local authorities with council tax banding.
You can challenge your council tax band or ask for a property to be removed from the council tax list via the government website. You will need to provide evidence to support your case.
What about buy-to-let properties, empty homes and holiday lets?
Different rules may apply if you own an additional property, but do not use it as a second home.
Buy-to-let
If you own a second home that is a buy-to-let property you aren't liable for council tax. In most instances, it will be your tenant’s responsibility to pay the levy. It means this kind of home will not be subject to the second home council tax penalty.
The exception is if you own a 'house in multiple occupation', i.e. you let out rooms in a home on an individual basis. In this scenario, the owner is responsible for paying the council tax – although they can add it to the rent they charge.
Empty homes
An empty, unfurnished property can be charged an empty home premium in England. It has to have been in this state for at least 12 months. How much you pay will depend on how long the property has been empty:
- Homes empty for 1-5 years: premium of up to 100%
- Homes empty for 5-10 years: premium of up to 200%
- Homes empty for 10+ years: premium of up to 300%
Your home will continue to be classed as empty until it has been furnished and occupied for more than six weeks in a row.
In Scotland, the premium can be 100%. In Wales, it can be up to 300%.
Holiday lets
Provided you meet the rules to be classified as a holiday let, you won’t have to pay council tax on your property. Instead, you will pay business rates, which tend to be cheaper.
In England and Scotland, to be classed as a self-catering property, a second home needs to be available to let for short periods of at least 140 days in the tax year. It needs to have been actually let for at least 70 nights.
In Wales, a holiday let must be available for short lets for at least 252 days a year and rented for at least 182 days.
How much council tax will I pay on my second home?
If your second property doesn’t fall into one of the above categories, and is classified as a second home, the amount you end up paying will depend on several factors:
- Where your second home is located
- What council tax band it is in
- Whether you are eligible for a council tax discount
In England, councils that have voted in favour of the rule change will be able to double council tax bills on a second home.
The average annual council tax bill for 2024-25 is £2,171 per year, based on Band D (the standard measure). This means you could expect to pay around £4,342 a year from 1 April 2025, if your second home is in an area that had decided to implement the 100% premium.
Can I avoid paying council tax on a second home?
There are a limited number of exemptions for second home council tax. If the extra cost means retaining your extra home is no longer financially viable, the best option could be to sell your property.
You could convert your home into a holiday let, which would exempt it from council tax. But, of course, this means limiting your usage of the property and could bring all the trials and tribulations that come with letting out a home.
Furnished holiday lets are also becoming less attractive thanks to other tax changes that will kick in from April. Owners used to qualify for certain tax reliefs on their property income (for example they were able to deduct mortgage interest), however this is set to change.
From April, owners of furnished holiday lets who decide to sell up will no longer qualify for a reduced rate of capital gains tax either.
If you can’t live in your property because you are carrying out extensive renovations, you might not have to pay council tax during that period. Inherited homes also don’t face the additional charge for one year to allow their new owners to complete the probate process. Finally, if you cannot live in your property because of your occupation, you may also be exempt.
