Holiday lets, undoubtedly, contribute to the economy, create jobs, and support tourism. Let me be clear that the Government backs small businesses, including responsible short-term holiday letting, which I recognise brings significant investment to local communities. At the same time, it is important to acknowledge the impact that large numbers of holiday lets concentrated in an area can have on local communities and I would like to assure you that the Government is alive to these issues. The Government has stressed that it is committed to avoid the hollowing out of communities, address anti-social behaviour and ensure local people can continue to live in the place they call home.
To this end, the Government will abolish the Furnished Holiday Lettings tax regime. Importantly, this will eliminate the tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties to longer-term tenants. This does not stop people conducting short term lets, but rather ensures that the system is equal for those letting long term or short term. This will level the playing field between short-term and long-term lets and support people to live in their local area. This will take effect from 6 April 2025 and require legislation.
The Government has also announced that it will bring forward a new tourist accommodation registration scheme and has passed legislation with the necessary powers to do so. The scheme will give local authorities the data to easily identify short-term lets in their area, making it easier to take action against problematic short-term lets. The Government is considering how to apply the register so it does not apply disproportionate regulation, for example, on property owners that let out their home infrequently.
This builds on other measures in the legislation which give local councils the power to apply a council tax premium of up to 100 per cent on empty and second homes in their area. The Government also announced it is reducing Capital Gains Tax on residential properties to boost the availability of housing by encouraging residential disposals. This aims to encourage landlords and second home-owners to sell their properties, making more available for a variety of buyers including those looking to get on the housing ladder.
In addition, the Government announced it will be introducing a requirement for planning permission for an existing home to start to be used as a short-term let. Under reforms councils will be given greater power to control short-term lets by making them subject to the planning process. This will support local people in areas where high numbers of short-term lets are preventing them from finding housing they can afford to buy or to rent. However, homeowners will still be able to let out their own main or sole home for up to 90 nights throughout a year without planning permission.
I also recognise concerns that owners of some properties that are not genuine businesses reduce their tax liability unfairly by declaring that a property is available to let, while making no sincere effort to let it out. I therefore welcome that the Government has introduced changes to the tax system to strengthen the self-catering accommodation criteria for business rates to rectify this issue. As of 1 April 2023, in order to qualify for business rates, holiday lets must be available as a commercial holiday let for short periods totalling at least 140 days in the year after the day in question. The property must also have been available in the previous year for letting commercially as self-catering accommodation for short periods totalling at least 140 days and actually commercially let for short periods totalling at least 70 days. The Valuation Office Agency is responsible for determining whether a property should be assessed for council tax or business rates. I understand that holiday let owners could be required to provide evidence such as the website or brochure used to advertise the property, letting details and receipts.
I am confident that, together, these steps will help to create a fairer system for local communities while still allowing for responsible holiday lets which contribute to the economy, create jobs, and support tourism.
