Doubling Dorset Council Tax for Vacant Second Homes

What Does This Mean for You?

As the winds of change sweep across Dorset, property owners with secondary homes in the area are facing a new fiscal reality. Dorset County Council has recently made a bold decision to double the Dorset council tax for vacant secondary homes, sending shockwaves through the local property market.

But why has this decision been made, and what does it mean for property owners? Dorset Cottage Holidays has been looking at this decision and exploring some strategies to navigate the changes ahead.

The decision: Doubling Dorset council tax for vacant secondary homes

Dorset County Council’s decision to double council tax for vacant secondary homes comes as part of a broader strategy to address housing shortages and housing affordability issues in the region.

With a growing number of secondary homes sitting empty for significant portions of the year, the council aims to incentivise owners to either occupy their properties or make them available for long-term rental; however with new powers being given to long term tenants, this is a perilous option for those who want short terms tenants.

The hike in council tax is set to come into action from April 2025, with the increased council tax applying to properties designated as secondary homes. This includes properties that are not the owner’s primary residence and are used for purposes such as holiday lets or occasional use.

Not great news, but all is not lost: 100% rate relief for small business.

Property owners have several strategies available to write off the increase in costs they will be facing.  Firstly as the council is trying to encourage occupation for the whole year, holiday home owners can open availability for the whole season, with short breaks to offer employment to local housekeepers and enhance the local community during the winter months.

Secondly, leave the experts to drive your revenue.  Many owners have already made the switch to dynamic pricing, which allows DCH to price according to market trends and demand – this always leads to a greater annual revenue for owners.

Thirdly, property owners seeking to avoid the doubled council tax on their secondary homes should explore the switch of their property’s classification to business rates. By operating their property as a holiday let under the business rates scheme, owners may mitigate the impact of the increased Dorset council tax.  Further relief can be gained if this is your only business as currently there is 100% rate relief on small business rates.

However, transitioning to business rates comes with its own set of considerations…

While it may offer relief from the doubled Dorset council tax, owners will need to navigate the administrative requirements and potential tax implications associated with running their property as a business, but we believe this far outweighs the expense of paying double council tax. These implications include accounting for additional costs such as business insurance, compliance with health and safety regulations (which is already in place) and paying for refuse collection.

Owners need to consider whether their property complies with the rules to switch from Dorset council tax to business rates

In order for a holiday let to qualify for ‘Furnished Holiday Let’ business rates, there are certain criteria that need to be in place:

1) The property has to be fully furnished, well equipped and with adequate services for holiday guests.

2) The property will need to be available for a minimum of 140 nights (in a 12 month period) and must have been rented to paying guests for a minimum of 70 nights within this period, but we are being told that this is changing to 105 nights.

3) As the property is a holiday let, no one letting period can exceed 31 days.

Advantages and disadvantages of business rates for second homes

Transitioning to business rates for secondary homes carries both advantages and disadvantages for property owners:

Advantages: 

• Tax Relief: Business rates may offer a lower tax burden compared to the doubled Dorset council tax for secondary homes.
• Flexibility: Operating the property as a holiday let under business rates provides owners with greater flexibility in terms of occupancy although there are stipulations in place.
• Potential Income Generation: By attracting short-term tenants, owners will generate fantastic revenue. With the help of our expert Property Managers, dynamic pricing, property staging and professional photos, Dorset Cottage Holidays can easily surpass the burdens that business rates impose.

Disadvantages:

• Small Administrative Burden: Managing a property under the business rates scheme entails additional administrative tasks, including tax filings and compliance with regulatory requirements.
• Cost Implications: Owners must account for expenses such as business insurance and refuse collection. But of course some costs are then tax deductible.

So, how do I move my holiday home into business rates?

As long as your property meets the following criteria you can ask to be moved over to Business Rates:

• Your property is available to let for short periods for at least 140 days (this will be subject to change as new planning permission rules coming into effect will require 210 days)  in total over the current and previous tax year/
• Your property was actually let for at least 70 days in the last 12 months (rolling)

If you feel that the property meets the criteria, you will need to contact the Valuation Office Agency (VOA) so the dwelling concerned can be removed from the Dorset Council Tax list and included in the Business Rates list. You can contact the VOA online.

When contacting the Valuation Office Agency, you should provide the following information:

• The effective date (i.e. the date that the property was first advertised and made available for holiday let purposes)
• Where the property is being advertised (i.e. through which company, and where online this can be found – if it is advertised with an additional/different house name please provide this also)
• Your postal correspondence address and an email address

Further information can be found online here.

But who will collect my refuse?

There are a few options open to you – but the best priced service comes directly from the council business collection service, which has the added advantage of recycling as much waste as possible.

You can either:

• Pay for purple sacks (approx. £50 for 25) that guests leave out on the appointed day (though these can be problematic with local wildlife)
• Pay for a weekly wheelibin collection, which is approx. £400 per year for a three bed cottage and £70 for the wheelibin.

You can contact Dorset Waste Partnership here to get a quote.

So in conclusion…

By switching to business rates, property owners transition their property from a residential classification to a commercial one, altering the tax regime and associated obligations.

While, in essence, by switching to business rates, owners may benefit from potentially lower taxes, they must also navigate some small additional administrative tasks and appoint a refuse company to maintain regular refuse collection.

To explore property management services to help alleviate tasks and worries following the raise in council tax, speak to our property manager, Blake Langhorn, by giving us a call on 01929 553443 (Monday to Saturday). Dorset Cottage Holidays in the largest independent holiday letting agent in Dorset. Our offices have been rooted in Corfe Castle since 1999 and we pride ourselves on delivering a comprehensive property management service for our owners. If you’d like to find out more, please get in touch.