Maybe it’s your dream come true to own a second home: a private getaway for holidays on the coast or in a rural hamlet? Some buy a second home with the aim of renting it out to visitors on short-term lets, as well as using it themselves when they need a break.
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If it’s something you’re considering, it pays to understand how second home tax works, as the financial aspects should play a big part in your decision. The costs of buying and running a second home can vary, depending on which of the home counties it’s located in and the specific regulations.
Second home council tax regulations
While the principle of paying council tax is the same in England, Scotland and Wales, there are differences in the operation and detail of the system in each of the home nations.
In England, you’ll usually have to pay council tax on any other property that you rent or own, such as a holiday home. A holiday home, or second home, is classed as a furnished property with no-one living there as their main residence, with the usual appliances that you would expect in a regular dwelling.
Starting on 1st April 2025, changes are being introduced to the tax on second homes and you may be required to pay up to twice your normal amount. It’s at the council’s discretion whether your property is classed as a second home and whether the additional tax will be charged.
On 1st April 2024, all second homes in Wales became subject to a 100% council tax premium when new legislation was introduced.
In Scotland, you may be entitled to a council tax discount for second homes and holiday homes. Always check with the council, as it has discretionary rates and can decide whether to grant a discount or not. You may receive a reduction of between 10% and 50% but will need to inquire yourself.
Owning a second or holiday home in Northern Ireland may result in extra charges, depending on its value and location. However, if it’s furnished and can be rented for a specific period, you may receive a discount.
The rules across the UK can be complex, so always check with your local council before purchasing.
How does council tax banding work?
The amount of council tax that owners are required to pay is based on the market value of each property, as assessed by the Valuation Office Agency. Domestic properties classed as a dwelling, including second or holiday homes, are assessed according to this value. When setting the band, the calculation is based on the price the property would have sold for on the open market at a specific time.
In England, the different bands range from A to H, with A being homes valued at up to £40,000 and H homes valued at more than £320,000. The higher value homes are subject to a more expensive annual council tax bill. The VOA currently uses prices that the property would have sold for on the open market on 1st April 1991 for council tax in England.
A similar system is used in Wales, although the bands there range from A to I, with homes in band A valued at up to £44,000 and band I at more than £424,000. In Wales, the VOA uses prices that the property would have sold for on 1st April 2003.
The same system applies in Scotland, although the band values are lower overall, with properties in the A band valued at up to £27,000 and H band at more than £212,000. The band is based on the market value of each property on 1 April 1991.
In Northern Ireland, there’s a rates system, rather than paying council tax, but monies are collected by the local council in the same way and the same principles apply. The Land and Property Service of Northern Ireland offers a service to enable owners to calculate the value of their property for rates purposes. Just as householders can apply for council tax reduction in England, Wales and Scotland, residents of Northern Ireland can apply for rates reduction
Council tax for empty properties
Normally if you have an empty home in England, you must pay council tax on it, but the local authority may decide to give you a discretionary discount, so contact them to find out what the criteria are.
The amount of council tax depends on how long your home has been empty. The longer it has been empty, the more you will have to pay. If your home has been empty for ten years or more, the council tax may be up to four times the usual amount.
If your home has been empty for one year or more, you may be charged an additional premium.
In Wales, on 1st April 2023, a new law came in adding a 50% council tax premium for properties that had been empty for one to two years and a 100% premium for homes empty for longer than two years.
When you own a property in Scotland that has been empty for 12 months or longer, the council tax will double, unless you qualify for any exemptions, so it’s advisable to contact the local council to find out the criteria. For example, if the property is being actively advertised for rent or sale, you may receive a council tax discount for up to two years after the previous occupation date.
Property rates are payable by all domestic properties in Northern Ireland with a rateable value of at least £20,000, including empty dwellings.
The classification of your property as a second home or an empty dwelling will impact the amount of tax payable on it, so it’s advisable to understand the rules in your region so you don’t end up paying too much or falling foul of the law.