An increase in second home council tax is forcing UK property owners to sell up as landlords reassess their financial situation. The government initiative, introduced on 1st April, will negatively impact more than half a million people, according to critics.
© ShaunWilkinson / Shutterstock.com
Introducing a 100% rise in council tax on holiday homes in England is aimed at helping to ease the housing crisis, bringing in an estimated £445 million in revenue for the government. Around 75% of local authorities in England are implementing the discretionary scheme this month, following in the footsteps of Wales, where a premium is already charged.
However, the initiative has been described by the Taxpayers’ Alliance as being simply a “cash grab”, as it goes against the basic premise of council tax being linked to the extent of use of local services. Instead, it’s penalising home owners whose properties aren’t inhabited all year round, charging them extra for services that they actually use less.
Data from Sky News shows more than 200 councils have introduced the tax on second homes, including in holiday hotspots such as Torbay, Cornwall, Somerset and Norfolk. Inner-city areas including the London boroughs of Camden, Wandsworth and Hackney have also adopted the scheme. With Londoners already paying an average of almost £2,500 council tax per year, those with a second home could see their bills rocket to £5,000 for 2025/26.
Around 557,000 people in England who own second homes are preparing to weather the storm of higher expenses this month as a result of the council tax increase. However, the Ministry of Housing, Communities and Local Government has issued a statement saying it’s necessary to fix “the housing crisis we have inherited” from the previous government.
The legislation means councils in Scotland are also empowered to charge a second homes premium of up to 100% on properties from 1st April 2025. Unlike the rest of the UK, Northern Ireland doesn’t apply an additional premium for second homes.
How has the initiative impacted Wales?
Second home owners in Wales are already being affected by local councils’ ability to charge a premium, as a result of an amendment to the Housing (Wales) Act 2014. A second home is defined as a “substantially furnished” dwelling which isn’t the owner’s main or sole home. The Local Government Finance Act 1992 defines them as dwellings that are “occupied periodically”.
In Wales, the discretionary council tax premium for second homes can be as much as 300%. The introduction of legislation in England this month permits a premium of up to 100%, so it hasn’t yet hit the heights of the earlier increase across the border.
The impact of council tax on property owners in Wales triggered a “surge in sell-offs” last year, according to data from Sky News in September 2024. The number of second homes being sold in some parts of Wales increased by more than 250%, as landlords criticised the Welsh government’s premium.
The discretionary scheme saw some districts charge an inflated council tax rate of 300% for second homes in 2024, aimed at freeing up under used housing stock for local people and generating income. In Pembrokeshire, the premium increased to 200% in April 2024, leading to many serviced accommodation owners selling up.
Data from July 2024 revealed the number of second homes listed for sale in Wales had increased by 255% compared with the same period in 2023, as owners simply couldn’t afford to run them anymore. However, the market was stagnant, with local estate agent Hamptons saying the homes on the market were too costly anyway for first time buyers.
Rather than freeing up seldom used homes for local people, the legislation had simply “created a glut of unsuitable properties for long-term use”, according to Pembrokeshire’s Nested Estate Agent.
In addition, there have been accusations that reducing the number of second homes used as visitor accommodation has impacted the local economy. In Tenby, restaurateur Matthew Ronowitz, employer of 75 staff, spoke out against the 2024 increase, claiming reducing the number of second homes would negatively impact the local tourism economy.
He believed the amount of holiday accommodation helped his restaurants to benefit through steady business all year round, having a positive impact on the local economy. He was concerned the council tax premium left holiday let landlords feeling they were being “pushed out by the local authority”, negatively impacting Tenby’s businesses and jobs for local people.
Backlash against the rises
The Taxpayers’ Alliance has already stated the premium is “unfair” and believes owners of second homes should receive a discount on council tax, because they use local services much less than regular householders.
There are fears that they are being forced to reassess their properties due to increased tax burdens, leading some to sell their secondary homes. In tourist hotspots, this could lead to a shortage of accommodation for visitors, having a negative knock-on effect for local businesses relying on seasonal trade.
Serviced accommodation owners in places such as Cornwall and the Lake District are already assessing their futures. A report by the BBC, on 2nd April, suggested some holiday homes in Cornwall were already being sold, after estate agents reported an increase in properties coming onto the market.
In the Lake District, Westmorland and Furness Council has implemented the full 100% council tax premium on second homes from 1st April. The impact of the increases has yet to be assessed.
In addition, there are concerns the changes could affect the construction sector, as second homes represent an important source of income for builders in holiday and rural regions. Due to the council tax premiums being discretionary, some local authorities may offer exemptions or discounts, but these are becoming less common as the pressure to tackle the UK housing crisis intensifies.
Over time, second home ownership may decline as a result of the increased costs, especially if more tax increases are introduced, or if the profitability of owning a second home diminishes further.
Support for the scheme
Not everyone believes the rises are a bad idea, including Adam Hug, housing spokesperson for the Local Government Association, who says councils must address their local housing crisis. He describes the initiative as “a nudge in the right direction” and “one of a suite of tools that can be used” to encourage councils to better manage their housing supply.
Redruth resident Cath Hayes, co-founder of campaign group First Not Second Homes, believes doubling the council tax isn’t sufficient. She wants to see it “more than double”, explaining anyone who can afford a house in Cornwall is “doing well”, so for a person who can afford two houses, a 100% rise isn’t a deterrent.