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Life is about to get more difficult for holiday-let landlords and second homeowners, as tough measures are being introduced in Wales to ameliorate the housing crisis, says Alun Evans, a partner in the largest independent accounting firm in Wales, Bevan Buckland LLP.

Alun says: “Many first-time buyers and local families will welcome the Welsh Government announcement of an increase to the maximum level of council tax premiums for second homes allied with new local council tax rules for holiday lets. First time buyers and people who are struggling to buy or rent property in their local community are likely to benefit – but, of course, on the other side of that coin, these measures will hit landlords very hard in the pocket, and may impact the economic benefit of the tourism trade in rural areas.  It is vital that property owners and potential buyers examine the implications of these changes and take professional financial advice.”

The changes are part of a drive to address the issue of second homes and unaffordable housing facing communities in Wales, using the planning, property and taxation systems to try to redress some of the imbalance in the market in recent years. In practice, the maximum level at which local authorities can set council tax premiums on second homes and long-term empty properties will be increased to 300 percent, effective from April 2023.

This will enable councils to decide the council tax level which is appropriate for their local circumstances and they will be able to apply different premiums to second homes and to long-term empty dwellings. Premiums are currently set at a maximum level of 100 percent and they were paid on more than 23,000 properties in Wales this year.

The criteria for self-catering accommodation being liable for business rates instead of council tax will also change from April 2023, so a high number of landlords will be affected by this.  Currently, properties that are available to let for at least 140 days, and that are actually let for at least 70 days, pay business rates rather than council tax. Most small holiday lets take advantage of small business rates relief so that no rates are payable. The change will increase these thresholds to being available to let for at least 252 days and actually let for at least 182 days in any 12-month period. The change is intended to give clearer evidence that the properties concerned are being let regularly as part of genuine holiday accommodation businesses making a real contribution to the local economy. Interestingly there are no proposed changes to the income tax definition of a furnished holiday let business which remains at being available to let for 210 days and physically let for 105 days.

Bevan Buckland LLP is the largest independent accountancy firm in Wales providing practical support and strategic accounting, tax and financial planning advice for small to medium-sized businesses. Headquartered in Swansea, the firm has offices in Carmarthen, Pembroke, Haverfordwest, Cowbridge and St David’s.

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