The Budget 2018


New rules for holiday lettings

Owners of holiday homes may be able to pay no council tax or business rates for their property by registering the property as business premises. They then claim small business rates relief (SBRR) to reduce the business rates bill to nil. An assessment for business rates takes priority over council tax, but it is normally more costly to pay business rates if SBRR is not available.

From April 2023, for the property to qualify for SBRR, the landlord will have to provide evidence that the property will be offered for short-term commercial letting for at least 140 days in the current year. This evidence may be in the formof bookings, receipts or adverts. In addition, the landlord will have to show that in the previous tax year the property was:

  • available for short-term commercial letting for at least 140 days; and
  • actually let for short-term letting for at least 70 days.
  • Anyone who lets holiday accommodation that seeks to benefit from SBRR will need to meet these conditions for the year starting 6 April 2022, in order to be able to provide the required evidence in April 2023.

    Residential Property Developer Tax

    As announced in February 2021, the government
    is introducing a new tax from April 2022 on the profits that companies and corporate groups derive from UK residential property development. This is intended to ensure that the largest developers make a fair contribution to help pay for building safety remediation. The tax will be charged at 4% on profits exceeding an annual allowance of £25 million. 

    Annual Tax on Enveloped Dwellings (ATED)

    ATED applies to residential property worth above £500,000 which is owned through companies and other corporate structures, unless the situation qualifies for a relief. The rates increase automatically each year in line with inflation: they will rise by 3.1% from 1 April 2022 in line with the September 2021 Consumer Price Index. The amount ranges from £3,800 to £244,750 per year.

    The next 5-yearly revaluation of relevant properties is due on 1 April 2022, which may affect the ATED payable from 1 April 2023, if a property moves into a different valuation band as a result.