Thousands of holiday home owners across Wales could soon see changes to holiday let rules, as the Welsh government launches a 12-week consultation reviewing the current system.
Currently, holiday let properties must be available to rent for at least 252 days a year and actually booked for a minimum of 182 days to qualify for business rates, leaving owners that fall short liable for hefty council tax bills.
Phil Schofield, head of marketing at specialist holiday home insurance provider Schofields, says the rules have come under increasing criticism from holiday let owners, particularly those in seasonal and rural destinations where demand naturally fluctuates throughout the year. He explains how the speculated government changes could affect small, family-run holiday let businesses.
What do the current rules actually mean?
"Many people assume that owning and renting out a holiday cottage is enough to qualify for business rates, but that's not the case.
"In Wales, holiday lets that aren’t booked for a minimum of 182 days don't reach the occupancy thresholds, and are usually treated as domestic second homes instead, which can result in substantially higher council tax charges, including premiums of up to 300% in some areas.
"For many owners, that's the difference between running a sustainable business and facing a significant additional tax bill.
"The rules were introduced to distinguish genuine holiday let businesses from second homes. However, many operators argue the current thresholds don't reflect the realities of tourism, particularly in seasonal destinations.
"Demand naturally rises and falls throughout the year. Coastal resorts, national parks and rural communities often experience much quieter winters, making it far more difficult for legitimate businesses to achieve 182 booked nights every year.
"As a result, many owners feel under constant pressure to secure bookings, even during periods when visitor demand is traditionally low.
"The consultation is exploring a modest reduction to the current 182-day threshold, with the exact figure still under consideration, while also looking at whether reducing it by more than four weeks, to fewer than 154 days, could ultimately undermine the policy's objective.
"It is also considering exempting holiday lets that form part of wider tourism businesses, large multi-unit accommodation, properties with planning restrictions limiting permanent occupancy, and self-catering units located within an owner's home grounds or on a working farm, provided they continue to operate as commercial holiday accommodation.
"If those proposals are adopted, they could provide a welcome boost for many genuine holiday let businesses that have struggled to meet the current requirements through no fault of their own.
"While the changes wouldn't solve every challenge facing the sector, they could ease some of the financial pressure on smaller, family-run businesses that rely on seasonal tourism.
"If the rules become more flexible, many owners may no longer feel the need to chase every possible booking simply to avoid a substantial council tax bill.
"While the proposed changes will be welcomed by many holiday let owners, it's important not to assume the rules have already changed.
"The Welsh government's review is still ongoing, and the existing occupancy thresholds remain in place. Until any new legislation is confirmed, owners should continue planning around the current requirements and do everything they can to meet them.
"The fact that ministers are reviewing the policy is encouraging. It suggests there's growing recognition that a one-size-fits-all approach doesn't always reflect the realities of running a genuine holiday let business in seasonal destinations."
