Councils could face a shortfall of over £380m due to second-home owners reclassifying their properties, research has revealed.
Analysis from investment management company, Colliers, has found that the Government policy which enables councils to charge those who own second homes higher council tax has led to more people reclassifying their properties as holiday lets.
As a result, councils are in danger of missing out on roughly £383m in tax loss due to second-home owners moving into paying business rates rather than paying double council tax.
With £334m having been foregone by local authorities last year, the analysis confirmed that 77,241 holiday let properties will be eligible for total business rates relief in 2026-27.
Colliers has warned that local government finances are being negatively impacted by the framework and has called for a ‘fundamental review’ of both the council tax and business rates systems.
John Webber, a rates expert at Colliers, told GB News that the ‘short-sighted policy of trying to extract money from those with second homes is backfiring’.
Mr Webber said: ‘Most people will happily pay what they have to pay, but the politics of envy is forcing people to move to business rates once they meet the criteria - Government policy means they will then pay nothing.’
‘We blame the Government for this, not people with second homes’, he added.
