Increase Of Council Tax To 300% For All Second Homes In Wales

Council Tax for second homes in Wales will increase by up to 300% starting on 1 April 2023, and each local council in Wales will decide the amount by which the Council Tax will increase.

The Welsh Government conducted a consultation in 2021 regarding possible changes to local taxes on second homes and self-catering accommodation. It is important to note that the proposals contributed to one part, a fair contribution, of the Welsh government’s three-pronged approach to dealing with the issues that can arise from large numbers of second homes in communities and to assisting people to maintain affordable living standards in their local communities. 

It was intended that the consultation would allow individuals and organisations to provide their views and evidence on the existing discretionary powers of local authorities to impose a higher rate of council tax on second homes and long-term empty properties.

It is because of the consultation that legislation has been made that increases the maximum council tax premium that local authorities can decide to charge on second homes and long-term vacant properties to 300%. 

In addition, the Welsh Government has revised the criteria for determining whether self-catering accommodation falls under the category of non-domestic property. Changes to the Non-Domestic Rating Order 2022 apply from 1 April 2023 as well. As of that date, self-catering properties must be available to let for at least 252 days in any 12-month period and must actually be rented for at least 182 days.

Using the new thresholds will ensure that self-catering properties are only classified as non-domestic properties if they are being used for business purposes for the majority of the year and make a substantial contribution to the local economy as a whole. Self-catering properties that fail to meet the new letting criteria on 1 April 2023 will be classified as domestic properties and will be subject to the same council tax as domestic properties. In the event that a local authority has decided to apply a premium to second homes, the owner will also be liable to pay this additional charge unless their property falls within an exception to this rule.

Several representatives of the self-catering sector as well as the tourism industry have expressed concerns that some operators may be unable to meet the new criteria as a result of the new legislation. Some self-catering properties have been suggested to be subject to planning conditions that prevent them from being occupied for permanent periods of time or specify that they can only be used as holiday accommodations, and this can have a significant impact on the options available to the owner when the new letting criteria come into effect.

Council tax premium exceptions have therefore been extended through new legislation. In addition, it will include properties that are subject to planning conditions that prohibit occupants from occupying those properties for the purpose of living as their sole or main residence or specify that they may only be used as holiday accommodation. When such properties do not meet the letting criteria for non-domestic properties, council tax will be charged at the standard rate, but no premium will be charged. The legislation is expected to come into effect on 1 April 2023, which is the intended date of implementation.

As far as short-term lets themselves are concerned, the amount of time a property has to be let for the purpose of being eligible for non-domestic rates is increasing from 70 days to 182 days. It is also intended that regulations will be amended to increase the required period of time that a property must be available to let, increasing it from 140 days to 252 days as part of the changes.

With the intention of raising the thresholds, it is intended to provide a clearer demonstration that the properties in question are being rented regularly as part of genuine holiday accommodation businesses, and that they are contributing significantly to the local economy.  

The order is expected to come into effect and begin applying the new criteria from 1 April 2023.  

Until 12 April 2022, there is an opportunity for landlords to respond to a draft statutory instrument. If you are interested in submitting your response, you can find the details here:

https://www.gov.wales/draft-non-domestic-rating-definition-domestic-property-wales-order-2022

If you have any questions about this news may affect you as a landlord or your upcoming taxes please contact UK Landlord Tax on 01902 711370 or email enquiries@uklandlordtax.co.uk

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