Changes proposed to Wales holiday let tax rules

Controversial tax rules for owners of self-catering holiday accommodation in Wales look set to change following proposals put forward by the Welsh government.

Since 2023, self-catering properties must be available for 252 days and let out for 182 days each year to pay non-domestic rates instead of the higher council tax.

The Welsh government is now proposing changing this to an average of 182 days let over several years.

Cabinet Secretary for Finance and Welsh Language Mark Drakeford said the Welsh government had “listened” to feedback and was proposing “small changes” to the rules.

A total of 40% of holiday lets in Wales have not met the letting criteria since the new rules were brought in from 2023.

Drakeford’s new plans were criticised by Welsh-language society Cymdeithas yr Iaith.

The campaign group said the Welsh government should be “focusing on the housing crisis” rather than changing recent legislation which the “majority of businesses are complying with”.

The Professional Association of Self-Caterers (Pasc) also criticised the latest announcement, calling it a “token gesture that fails to address the real crisis facing Welsh tourism businesses”.

Welsh Conservative Gareth Davies said the 182-day rule was “harming our tourism industry” and pledged that a Conservative government in the Senedd would reduce the threshold to 105 days.

“Tinkering around the edges will not help struggling businesses,” he said.

A Plaid Cymru spokesperson said they welcome “the increased flexibility for owners of holiday lets, however the occupancy threshold remains unchanged and continues to be a source of anxiety for many Welsh small businesses, particularly in rural Wales”.

“The government must also offer greater clarity on the criteria which allows exemptions in some cases, for example dwellings on farmland that would not be suitable for the open market.

“We remain committed to the importance of having raised the occupancy threshold, but we must always be aware of ensuring it’s set at the most suitable level.”

Previously, properties made available for let for at least 140 days – and actually let for 70 – qualified for lower business rates rather than council tax.

That system still operates in England.

However, in Wales properties now need to be made available for at least 252 days, and actually let for 182.

If not, they can be classed as second homes and liable for council tax – which in some areas means paying an additional premium.

The new proposals would allow for up to 14 days of free holidays donated to charity to count towards the 182-day target.

A consultation, open until 20 November, asks whether councils should consider giving businesses more time to adjust, such as a 12-month grace period before they may have to pay higher council tax rates.

Subject to the outcome of the consultation, the legislation would need to be passed in the Senedd to implement these proposals, with changes intended to take effect on 1 April 2026.

Drakeford said: “Wales has so much to offer, and we want to ensure we realise that potential in a way that achieves a balance between our communities, businesses, landscapes and visitors.

“We work closely with tourism and hospitality businesses to help address the challenges they face, while ensuring everyone makes a fair contribution towards local economies and funding public services.

“While most holiday let owners are already meeting the new rules brought in from 2023, with 60% of properties meeting the letting criteria, we have listened to those working in the sector and are proposing small changes to the current rules to support them.”

But director of Pasc UK Cymru Nicky Williamson said “whilst members will welcome the ability to count charity weeks again, this is nowhere near enough”.

She added: “For three years we have continually presented the Welsh government with data showing the damage caused by this policy – yet they continue to ignore the reality.

“Tourism in Wales has lost over a quarter of its overnight visitors since this policy began, yet the threshold for businesses hasn’t changed, leaving owners punished for something completely outside their control.

“Business owners are working harder than ever just to stand still, with 85% driven to discount to try to achieve the threshold.

“The 182 threshold is the problem and this must be reduced significantly.”

She explained the consequence of not meeting the 182 day threshold was being removed from business rates listing back to council tax and a second home premium applied.

In addition, she said people were receiving backdated council tax and second home premium bills for three years to 2022/23 – which can be up to £30,000 – with immediate payment required or the threat of court summons for money often not even due.

There was also criticism from the Wales Tourism Alliance, whose chairman Rowland Rees-Evans said many operators were “discounting heavily just to reach the 182 threshold, which is obviously not sustainable in the long term”.

“If you have a three-year rolling average and you don’t achieve 182 days in year one and two, then it is highly unlikely that it will be achieved in the third year.

“This will put enormous pressure on small businesses wherever they are in Wales.”

Wendy Kennedy, 63, has lived in her house near Port Eynon, on the Gower peninsula, Swansea county, for more than 20 years.

She and her husband converted the end of the 18th Century property into a holiday let more than 10 years ago and then converted their garage into a second holiday let in 2018.

Although starting as an “exciting venture” for the couple, she said the regulations set by Welsh government had made them rethink whether the business was right for them.

“We love welcoming guests, we love seeing people enjoying the Gower,” she said.

“But in the background, I can’t say that we’re enjoying this industry anymore. Trying to keep up with regulations which we’ve so far managed to do, but it’s the underlying ‘what if’ that we don’t meet the 182 days.”

With the pressure of having to reach 182 days of letting Ms Kennedy said the announcement “makes no difference to us”.

She said she “doesn’t like to think about” the possibility of having to pay a second homes tax if they did not meet the threshold.

“If I knew then what I know now then I would have really considered if we would have done it in the first place because it’s making us think what have we done, have we done the right thing?”

She added there was a “lack of understanding” by the Welsh government for people who have holiday lets as a part of their homes.

If they were not able to carry on with the holiday lets their property will be converted back into their home, which Ms Kennedy said did not solve the current housing issues.

Carol Peet, founder of West Wales Property Finders, based in Narberth, Pembrokeshire, said the proposal was “a step in the right direction but does not go far enough”.

She said the 182-day rule was “impacting the local economy, it’s impacting locals’ jobs because there are a lot of properties up for sale and they’re not selling, and so they’re not being used as holiday lets”.

“People who would stay there support the local economy and businesses, cleaners and things like that too. So it does impact the local economy,” she added.