Holiday letting: Business rates & council tax guide for 2025

Business rates, council tax and SBBR – what does it mean for you and your holiday letting?  Whether you own a second home for your own time by the sea, or wish to let it out – there are inevitably rates and taxes to pay.  This guide is here to help you work out what it all means for you and where to find more help and advice.

This guide is another topic is a reply to a common question our Owner’s Team get.  There are new rules for 2025 too which impact on which property can be charged business rates and massive changes to council tax.

Remember, we’re always here to help – so get in touch with us for more help and advice.

 

What are business rates?

Holiday let business rates is a charge levied on properties that are rented out on a commercial basis.  The funds are used to help finance local services which is important.

To keep it simple, residents pay council tax and businesses pay business rates to local authorities.  Business rates are charged on most non-domestic properties, including self-catering holiday lets.

If you own a second home or holiday home, you will either need to pay holiday let business rates or council tax for your property.  Empty properties attract a separate charge within the Dorset Council area.

 

 

What’s changing with business rates?

Even more changes in April 2025.  During the pandemic and subsequent recovery, the UK Government has been researching holiday lettings as an industry.  With everything under consideration from setting up a register, to changes in rates and taxation.

With effect from 6th April 2025, all Furnished Holiday Lettings (FHL) will be treated the same as any other residential letting business and all the benefits of an FHL will disappear.

After 5th April 2025, former FHL properties will form part of the taxpayer’s UK or overseas property business, which will then include all property profits and losses in that business.

None of the changes have any effect on the VAT status of the FHL business or on the VAT treatment.  Until April 2025, properties that qualify as FHLs can still access certain tax benefits.

 

Do I have to pay business rates or council tax on my holiday let?

All you need to do is distinguish whether yours is a second home or a holiday let.  A second home is defined as a residence which you plan to occupy for part of the year.  Properties that are let out for less than 20 weeks per year and used predominantly for your own holidays will qualify to pay council tax.

Holiday lets are valued for Business Rates in Dorset if:

• in the last 12 months the property has been available to let commercially for short periods of at least 140 nights; and
• the property will be available to let commercially for short periods of at least 140 nights in the next 12 months; and
• in the last 12 months the property has actually been let commercially as self-catering accommodation for short periods of 70 nights or more

Holiday lets will initially need to be charged Council Tax for at least 140 days.  The property can only be assessed for Business Rates once all of the above criteria are met.

The Valuation Office Agency will decide whether your holiday let should be listed for Business Rates or Council Tax.  Its important to remember that this decision is not made by Dorset Council.

If you meet the above criteria, you can ask the Valuation Office Agency to move your holiday let from Council Tax to Business Rates.  They may require your letting information and the information you provide for tax purposes to HMRC.

 

Do business rates qualify as a business expense?

Some do, some don’t.  This is something a tax advisor or accountant can help you with.  You may also find that operating as a limited company may produce different results too.  Again, you would need their input.

 

 

Find out more in Weymouth & Portland

You can find out more about business rates for Weymouth & Portland from Dorset Council.  Click here to view their dedicated web page, including where you can check your rateable values.

To find out more in other council areas, click here for the GOV.UK tool.

 

Still need some help and advice?

That’s OK – just get in touch with us.  Our Owner’s Team are here to help and point you in the right direction.