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, according to new research.

Colliers reveals that the policy has seen 85% of local authorities in England and 91% in Wales introduce higher council tax charges on second homes.

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.

Claim

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. The rules on occupation in Wales are stricter - the property must be a self-catering unit available for commercial let for at least 252 days and actually let for at least 182 days in a 12-month period.

Across England and Wales, the total number of holiday let properties eligible for 100% business rates relief for 2026/27 has risen to 77,241, up from 73,838 last year.

The figures show the short-sighted policy of trying to extract money from those with second homes is backfiring, according to John Webber, head of business rates at Colliers, who says it’s simply encouraging more owners to ‘flip’ into the business rates system.

Strongly

The impact is felt particularly strongly in the South West, where the firm's analysis shows 22,970 holiday let properties in Cornwall, Deven, Dorset and Somerset are now claiming full business rates relief (up from 21,678 last year), meaning they contribute neither council tax nor business rates.

“Blaming second homeowners for the inability of politicians of all parties to build sufficient social housing for a generation and then trying to use the tax system to penalise them is not only short sighted it is actually raising less money,” adds Webber.

Colliers is calling for a fundamental review of the business rates and council tax systems to close loopholes, ensure fairness, and protect local government finances.

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