If you own a holiday let property, you might assume that council tax automatically applies. But that’s not always the case.
In many situations, holiday lets fall under business rates instead of council tax. For some owners, this can actually be beneficial, particularly if the property qualifies for Small Business Rate Relief, which could reduce the bill to nothing at all.
Although the furnished holiday lettings tax regime ended in April 2025, there are still important day-counting rules to determine whether your property falls under business rates.
Let’s look at how the rules work.
When Do Holiday Lets Pay Business Rates?
Business rates apply when a property is used commercially, which includes holiday accommodation.
However, the rules depend on where the property is located. In England, a holiday let will fall under business rates if it meets both of the following conditions over a 12-month period:
- The property is available for short-term letting for at least 140 days
- It is actually let for at least 70 days
Short-term lets are bookings of 28 days or less.
If these conditions are not met, the property will usually be subject to council tax instead.
Which Days Count Towards the Test?
When working out whether the property qualifies for business rates, only certain days count.
For example, the following are not included:
- Nights when the property is used privately by family or friends
- Nights where the property is unavailable due to repairs or maintenance
- Future bookings that have not yet taken place
Only completed short-term lets of 28 days or less are included in the calculation.
Because of this, it’s important for holiday let owners to keep clear records of availability and bookings.
How Holiday Lets Are Valued for Business Rates
Holiday lets that fall under business rates will be assigned a rateable value.
How this is calculated depends on the size of the property operation.
- Single properties or small complexes (up to four units) are valued based on bed space
- Complexes with five or more units are valued based on a percentage of the fair maintainable trade
New business rates valuations will take effect from 1 April 2026, which could affect the amount payable.
Could You Qualify for Small Business Rate Relief?
Many holiday lets qualify for Small Business Rate Relief (SBRR), which can significantly reduce the amount payable.
If the property’s rateable value is £15,000 or less, relief may apply.
- If the rateable value is £12,000 or below, no business rates are payable
- If the value is between £12,001 and £15,000, relief gradually reduces from 100% to 0%
For many holiday let owners, this means the property may effectively have no business rates to pay.
New Multiplier for Retail, Hospitality and Leisure Businesses
If Small Business Rate Relief does not apply, business rates are calculated using a multiplier.
From April 2026, a new lower multiplier will apply to businesses in the Retail, Hospitality and Leisure (RHL) sector, which includes holiday accommodation.
The new multipliers are:
- 43p for properties with a rateable value between £51,000 and £500,000
- 38.2p for properties with a rateable value below £51,000
This change replaces the previous relief available to this sector.
Transitional Relief After the 2026 Revaluation
Following the 2026 business rates revaluation, transitional relief may be available.
This relief helps limit how much business rates can increase after a revaluation.
In addition, Supporting Small Business Relief may apply where:
- The property’s rateable value increases, and
- The business loses some existing relief, such as Small Business Rate Relief, Rural Rate Relief or Retail, Hospitality and Leisure relief.
These protections are designed to help businesses adjust gradually to new valuations.
Final Thoughts
Holiday lets can sometimes fall into an unusual position between residential and commercial property rules.
Whether you pay council tax or business rates will depend on how often the property is available and let.
If your property qualifies for Small Business Rate Relief, this could significantly reduce your costs.
But it’s important to make sure the day-counting rules and thresholds are being met.
Need Help Understanding the Rules for Your Holiday Let?
If you own a holiday let property and want to make sure you’re paying the correct tax and claiming all available reliefs, we’d be happy to help.
At Jon Davies Accountants, we help property owners and business owners across the UK understand the rules and plan effectively.
Get in touch with Jon or the team today if you’d like to discuss your holiday let or property tax position.
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Any questions?
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