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August 5, 2022

Delays Expected on Second Home Council Tax Increase

The Department for Levelling Up, Housing and Communities published a policy paper in May 2022 which detailed Council Tax changes as part of Levelling Up and Regeneration Bill.

It was proposed, amongst other things, that there would be an increased Council Tax premium rate for second homeowners, such that local councils across England would be able to charge additional Council Tax on homes that are furnished but not used as a sole residence.

The Levelling Up and Regeneration Bill focuses on the need to improve public services (especially in those places where they are lagging), restoring a sense of community and empowering local leaders.

This announcement was welcomed by councillors and Conservative MPs in popular UK holiday destinations such as Cornwall. These proposals could help boost local economies but could also potentially deter the purchase of second holiday homes.

The Government's rationale for the proposed Council Tax increase appears to be similar, with the one of the reasons stated for the surge in Council Tax being “...encouraging more empty homes back into productive use, while raising additional revenue to support local services and keep council tax down for local residents”.

What is the Proposed Council Tax Increase?

The Government have acknowledged the impact that high levels of second home ownership can have in some areas. As a result of this, they are looking to introduced a new discretionary Council Tax premium on second homes of up to 100% of the Council Tax payable.

In addition to the above, the proposed rules will also allow councils to apply a Council Tax premium of up to 100% on homes which have been empty for longer than one year. This is a reduction of the two-year rule which is currently in place.

When are the Rules Expected to be Implemented?

Councillors hoped that there would be revenue generated this year from the announcement regarding second homes, however it is now expected that the Council Tax premiums will not be implemented for at least two years. Details of the delay in getting the new powers were revealed at a meeting of Cornwall councillors at the end of July.

Tracy Stepney, interim head of financial planning and insight and deputy section 151 officer, explained to councillors that the second homes premium would be in line with the Levelling Up Bill from April 2024, although it may be the 2025/26 tax year before it is introduced.

It was also discussed that an empty homes premium being applicable after one year, as opposed to two years, would also likely be introduced from April 2024.

If you would like any UK tax advice on the calculation of your rental profits from your holiday homes, please do not hesitate to get in contact with a member of the team for expert tax advice.

Disclaimer: This article is for general information only and is not intended to constitute individual advice. As the Bill is subject to change, it is recommended that you seek independent tax advice. 

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