How much city tax does it cost for a second home?

Holiday home owners across England could be in for a shock as council tax doubles in many areas in April, increasing costs by thousands of dollars. This could increase your average bill from around £2,171 to £4,342 a year.

Legislation that came into force in early 2024 will allow local authorities to impose a council tax surcharge of up to 100% on second homes, as long as the property is not a primary residence. Councils are required to give homeowners one year's notice.

The idea was to free up housing stock in second home hotspots for local residents who may be priced out of the area due to lack of supply.

According to reports, more than 150 local governments plan to impose a surcharge. MoneyWeek contacted the Department of Housing, Communities and Local Government to confirm this figure.

Cornwall, South Ham and Cumberland are just three examples. The South Hams is home to the popular seaside destination of Salcombe, while Cumberland boasts the natural beauty of the Lake District.

According to research by the Local Government Chronicle, the council tax surcharge could raise more than £100m a year for councils.

Similar laws are already in place in Scotland and Wales. In Scotland, councils can charge up to twice the full amount of council tax on second homes. In Wales, premiums can be up to 300%.

Property website Zoopla has previously noted that changes to council tax could have a negative impact on house prices in some coastal and rural postal areas.

Rising mortgage rates and a squeeze on the cost of living are also making hanging onto a vacation home less attractive for some families.

House prices in North Devon are down 7.8% compared to a year ago, according to the latest official data. Prices in Cornwall fell by 1.5%.

How can I find out if the council tax surcharge applies to my area?

Many councils have already voted in favor of increasing council tax on second homes. These include Bath and North East Somerset Council, East Devon District Council, North Norfolk District Council and North Yorkshire Council.

You can find out if your local authority has voted to introduce this change by checking its website. If you live in a popular vacation area, such as the Southwest, it's especially important to check for changes.

To find out which local authority provides your service, enter your postcode into this government portal and you will be redirected to the relevant website.

What types of properties are subject to Second Home Council Tax?

Properties that are furnished but not classified as a primary residence are generally considered second homes. However, there are reports that there is confusion in some councils about what a second home is.

Last year, the BBC reported that council tax was tripled for a wooden shed in Pembrokeshire, despite not being considered habitable. The hut, which had no toilet, was deemed to have substantial amenities by Pembrokeshire County Council, and its owner was liable to pay £4,000 a year in tax.

If you receive an unexpected second housing tax bill for a property you believe is exempt, contact your local authority and the Valuation Authority, the government agency that supports local authorities in levying council tax. It's worth contacting.

You can challenge the scope of your council tax or request that your property be removed from the council tax list through the government website. You will need to provide evidence to support your case.

What about properties for sale, vacant houses, vacation homes, etc.?

Different rules may apply if you own additional property but do not use it as a second home.

Purchase/Rent

If you own your second home as a rental property, you will not pay city tax. In most cases, it is the tenant's responsibility to pay the levy. This means that this type of home is not subject to a second home council tax penalty.

The exception is if you “own your home for multiple occupations,” meaning you rent out rooms in your home on an individual basis. In this scenario, the owner is responsible for paying council tax, but they can also add it to the rent they charge.

empty house

In the UK, a vacant property premium may be charged for unfurnished vacant properties. This condition must have been in place for at least 12 months. The amount you pay depends on how long the property is vacant.

House vacant for 1 to 5 years: Up to 100% premium House vacant for 5 to 10 years: Up to 200% premium House vacant for 10 years or more: Up to 300% premium

Your home will continue to be classified as vacant until it is furnished and occupied for at least six consecutive weeks.

In Scotland, premiums can be 100%. In Wales it could be up to 300%.

holiday lets

You won't have to pay council tax on the property if it meets the rules to be classified as a holiday let. Instead, you'll pay business rates, which tend to be cheaper.

In England and Scotland, a second home must be available for short-term use for at least 140 days in a tax year to be classified as a self-catering property. Must have actually been left unattended for at least 70 nights.

In Wales, holiday rentals can be short-term rentals for at least 252 days per year and must be rented for at least 182 days.

How much city tax should I pay for my second home?

If your second property does not fit into any of the above categories and is classified as a second home, the amount you end up paying will depend on several factors.

Location of your second home City tax coverage Whether you qualify for a city tax discount

In England, councils that vote in favor of this rule change will be able to double the amount of council tax charged on second homes.

The average annual council tax bill for 2024-2025 is £2,171 per year based on band D (standard measurement). This means you can expect to pay around £4,342 a year from 1 April 2025 if your second home is in an area that has decided to introduce 100% premiums.

Can I avoid paying council tax on my second home?

There are a limited number of second home council tax exemptions available. If the additional costs make it financially impossible to maintain the additional home, the best option may be to sell the property.

If you convert your home into a holiday rental, you will be exempt from city tax. But, of course, this can mean restricting the use of the property and all the trials and tribulations that come with giving up your home.

Other tax changes starting in April also make furnished holiday homes less attractive. Owners have previously been eligible for certain tax breaks on property income (for example, they could deduct mortgage interest), but this is set to change.

From April, owners of furnished holiday homes who decide to sell will also no longer be eligible for reduced capital gains tax.

If major renovation work is carried out and you are no longer able to live in the property, you may not have to pay city tax during that period. There are also no additional fees for inherited homes for one year to allow the new owners to complete the probate process. Finally, you may also be exempt if your occupation prevents you from living on your own land.