Owners of thousands of second homes across England are set for a shock in April 2025 when a second homes council tax premium will roll out.
Laws which came into force in early 2024 mean local authorities can double the council tax on properties that are not used as a main residence, so long as they give homeowners a year's notice. The idea was to free up housing stock in second home hotspots for locals who may have been priced out of the area due to tight supply.
According to the Local Government Chronicle, dozens of councils - particularly those in the South West - are looking to implement the new rules. Recent Zoopla data has suggested there has already been a deterrent effect. The property website found house prices have fallen into negative territory in several popular locations as a result of people selling their second homes.
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Similar laws have already rolled out in Wales and Scotland. In these nations, local authorities can charge up to 300% council tax - a popular proposition in many town halls given the budgetary challenges they are facing after more than a decade of real-terms funding cuts by the UK central government.
The measure could raise nine-figure sums given the number of second homes around the country. Between 2010 and 2023, the number of second homes in England surged 65% (170,000) to 482,000.
So, who is facing the council tax premium - and can you get around it? We've got all the details you need to know.
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, Devon County Council, North Norfolk District Council and North Yorkshire Council.
You can find out if your local council has voted to bring in the changes by checking their website. It's particularly key 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.
Specific definitions depend on where you live. For example, if you live in England, your home will generally have to be unoccupied for more than 72 days a year to meet the criteria. However, there have been reports of confusion in some council areas about what a second home actually is.
On 2 October, the BBC reported that a wooden hut in Pembrokeshire had had its council tax trebled despite not being considered habitable. The toilet-less shack had been deemed to be substantially furnished by Pembrokeshire County Council, leaving its owners with a £4,000 a year tax bill. MoneyWeek has been told of instances where annexes have been treated in a similar way.
If you get an unexpected second home tax bill for a property you considered to be exempt, it's worth contacting your local council and the Valuation Office Agency - the government body that supports local authorities with council tax banding.
But what about other forms of second home, such as buy-to-let properties - do they face a premium too? Here are the council tax rules for these other types of additional 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 to this 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 homes premium in England. It has to have been in this state for at least 12 months.
The charge is 100% of your council tax if it is empty for over two years - but this can be cut to 12 months under the Levelling Up and Regeneration Act 2023. If your home is empty for over five years, the premium rises to 200% of your council tax, and 300% if the property is empty for over a decade.
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 and Wales, the premium can be more than 100%.
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’ll pay business rates, which tend to be cheaper.
In England, to be classed as a self-catering property a second home needs to be available for short let periods of at least 140 days in the tax year and have been let out for at least 70 days. 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. Scottish properties must be available for short lets for 140 days or more each year and let for 70 days each financial year.
How much will council tax on second homes cost?
The second home council tax premium is expected to raise over £100m a year for councils, according to research by the Local Government Chronicle. How much you may 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 is £2,171, according to the government. So, you could expect to pay around £4,342 a year from 1 April 2025.
However, you may get a discount on this. If your second home is a family annex it may be eligible for a 50% council tax reduction. Single occupants can usually qualify for a 25% discount – this includes people who live with under 18s or people in full-time education.
In Scotland and Wales, the cost increases could be even bigger given councils in these areas can go even further than in England. In areas that face 300% charges, a £2,000 annual council tax bill could surge to £6,000.
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 - or homes - is no longer financially viable, the best option would be to sell your property.
According to the latest data, house prices are making a healthy recovery after two challenging years of high mortgage rates. So, you might be able to make a return on your investment.
However, new Zoopla figures show that popular second-home areas have seen such a glut of second properties hitting the market, prices have deflated. Meanwhile, Labour could be bringing in changes to asset-related taxes in the Autumn Budget, which may hurt your gains.
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 can bring all of the trials and tribulations that can come with letting out a home. There are set to be further tax issues with this route too from next spring, given the government has announced it will be removing tax reliefs in April 2025.
The only other exemptions are for properties that can’t be lived in due to extensive renovations, or those that are subject to planning restrictions. Inherited homes also don’t face the additional charge for one year to allow their new owners to complete the probate process. Some individuals may also not have to pay double council tax. If you can’t live in your home because of your occupation, you may also be exempt.
In short, there are few ways to retain an extra home without facing additional council tax. And the options at your disposal all bring their own risks and challenges.
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