A potential tax on holiday lets could cost landlords an average of £5,000, wiping out annual profits and most of the market, the boss of a holiday lettings management firm has warned.

Chancellor John Healey is said to be weighing up a tax that would classify holiday lets as second homes rather than businesses, which would strip small business rates relief and move self-catering properties onto council tax instead. It comes after Andy Burnham announced plans to hand England’s mayors the power to introduce an uncapped tourist tax on a percentage of the cost of accommodation to overnight visitors.

Under current rules, owners in England who make their properties a business - available for rent as holiday lets for 140 days a year and let them commercially as self-catering accommodation for at least 70 nights - can claim they are a small business and elect to pay business rates instead of council tax. As a small business they can then claim for 100% relief of the business rates payable, if the rateable value of the property is below £12,000 - meaning no business rates or council tax are paid.

Richard Bond, owner of Finest Retreats (pictured), says the government’s “completely misguided” approach ignores that these properties operate as a mini business, employing local housekeepers and tradespeople, and with hundreds of thousands of employees in the sector.

Significant

“The Treasury just does not realise how significant this would be for every one of them and the tidal wave of destruction it would create across the whole industry,” says Bond. “There is already the distinction between holiday let businesses and empty second homes. Wales has learned that setting that boundary in wrong place can destroy livelihoods overnight and is already discussing resetting that boundary between ‘second home’ and ‘holiday let’.”

Earlier this month the government announced that landlords will have to sign up to a mandatory short-lets registration scheme in England from next March.

A suggested ‘tourist tax’ is a further blow for the sector. “It’s essentially an anti-growth policy,” says Bond. “For areas that introduce the visitor levy, fewer visitors could mean layoffs, or at the very least, fewer seasonal hires, especially considering these businesses are already absorbing higher National Insurance and minimum wages costs, none of which were in the manifesto.”

Cost

He tells LandlordZONE: “It would cost my business about £13,500 in credit card processing fees per year to collect.”

A recent survey by Colliers found that allowing councils to charge double council tax on second homes has encouraged more property owners to reclassify them as holiday lets and pay less tax. The policy has seen 85% of local authorities in England and 91% in Wales introduce higher council tax charges on second homes.

ONS figures show that the sector is flourishing, with an 11.5% increase in guest nights booked via online platforms such as Airbnb in 2025 compared with the previous 12-month period.

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