In recent years, the rise in holiday lets across Wales has led to a range of new rules and regulations for holiday lets, aiming to balance the growth in tourism with the needs of local communities.
Wales is a beautiful and popular destination for tourists, and the government is keen to support tourism while addressing housing affordability and community sustainability. If you own or are considering buying a holiday let in Wales, it’s essential to stay informed about these new regulations.
Here’s a breakdown of some of the new rules for holiday lets in Wales.
Business Rates vs. Council Tax: The New Criteria
Historically, holiday lets in Wales have benefited from being eligible for business rates rather than council tax if they meet certain criteria. However, to reduce the number of properties switching from council tax to business rates, which often results in small business rate relief, the Welsh government has raised the bar:
- New Letting Thresholds: To qualify for business rates, a property must now be available to let for at least 252 days in the year (up from 140) and must actually be let for a minimum of 182 days (up from 70). This change means that holiday lets need to prove more sustained activity to qualify for the business rates designation.
- Financial Impact: If a property does not meet these thresholds, it will be liable for council tax instead. In some regions, holiday lets that fail to meet the new thresholds could face higher council tax charges, especially as some councils, like those in Gwynedd, have opted to apply council tax premiums to second homes and properties not used as primary residences.
Council Tax Premiums on Second Homes
Wales has introduced measures allowing local councils to apply a council tax premium on second homes and holiday lets that do not meet the business rates requirements. The goal is to deter properties from sitting empty most of the year, given the housing shortages in some parts of Wales.
- Council Tax Premiums: Some councils in Wales, such as Gwynedd, have applied council tax premiums of up to 100% on second homes. This means owners could face double the standard council tax rate if their property does not qualify as a business or meet the activity thresholds.
- Potential for Higher Premiums: There is flexibility for individual councils to increase these premiums further, with some considering hikes up to 300%. These changes underline the importance of understanding and meeting the letting thresholds if you want to avoid these additional costs.
Planning Changes: Article 4 Directions in Gwynedd
With concerns about the impact of holiday lets on housing stock and community stability, Gwynedd Council has taken specific steps through planning policies known as Article 4 Directions. These policies aim to give the council more control over the number of properties used as holiday lets in certain areas.
- Article 4 Directions: Introduced in some regions, including popular tourist areas, these directions mean that property owners may need to apply for planning permission to change the use of their property to a holiday let. This includes converting a primary residence into a commercial holiday let, and failure to comply could result in penalties or restrictions on future use.
- Impact on Property Purchases: For potential buyers, this means additional due diligence is required, especially in Article 4 areas. Properties that are already established as holiday lets may retain their designation, but new investors should check with local authorities to ensure their plans align with current zoning and planning rules.
Understanding Regional Variations
While these changes represent national policy, individual councils in Wales can decide how strictly to implement them. Popular tourist regions, especially in North Wales, have seen stricter enforcement due to housing pressures. For example:
Anglesey: Second homes currently incur a 75% premium on council tax, which will increase to 100% (making the total council tax 200%) from April 2024
Gwynedd: This council has been a frontrunner in charging higher premiums, introducing a 150% premium (totalling 250% of standard council tax) on second homes since April 2023
Conwy: The council charges a 50% premium on second homes, which has been a significant policy given the demand for holiday properties in the area. However, discussions about future increases are ongoing.
Denbighshire: Currently, a 50% premium applies to second homes, with plans to increase it to 100% by April 2024, and potentially to 150% by 2025, pending council approvals.
Flintshire: While Flintshire currently has lower premiums, it is exploring options to increase the rates, following trends in neighbouring councils.
Practical Tips for Holiday Let Owners and Buyers
If you currently own or plan to invest in a holiday let in Wales, staying on top of these changing regulations is essential. Here are some practical steps to help navigate the new landscape:
- Meet Letting Requirements: Ensure your property meets the new letting thresholds to qualify for business rates. Working with a holiday letting agency can help boost occupancy and meet the requirements.
- Check Planning Requirements: Before purchasing or converting a property, consult with the local council to understand any planning permissions or Article 4 Directions that may apply.
- Stay Informed: Regulations are likely to continue evolving, so stay connected with local authorities, holiday lets agents like ourselves to keep up with the latest developments.
The new holiday letting rules in Wales reflect a growing trend across the UK, aiming to balance tourism growth with local housing needs. While they may increase costs or add administrative requirements, these changes also present an opportunity for property owners to contribute positively to Welsh communities by keeping properties active and supporting sustainable tourism.
Investing in a holiday let in Wales can still be highly rewarding, but navigating these rules requires awareness and adaptability. Whether you’re an existing owner or a potential buyer, understanding these regulations is essential for a successful and compliant holiday let business in Wales.
Note: The information contained in this article was accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time, so please contact our prospective new owner team if you’d like to hear how. Nothing in this article constitutes the giving of financial, tax or legal advice to you; please consult your own professional advisor (accountant, lawyer etc). in this regard. If we have referred within the article to a third-party provider of unregulated holiday let mortgages, this is due to the fact that such mortgages aren’t currently regulated by the FCA.As a helpful reminder, your home may be repossessed if you do not keep up repayments on a mortgage, so again anything you decide to do in this particular area this is one on which you should take your own professional advice on too, as we aren’t providing and can’t provide you with this.
As a holiday letting owner you are responsible for compliance with health & safety laws, regulations and guidance, and for having suitable insurances in place (not Sykes Holiday Cottages or its brands). From time to time, Sykes shares information with you on the topic of health and safety and insurance. When it does so, it is not providing you with advice (legal, financial, tax or otherwise); please seek your own as you see fit. In addition, it is not making any representations or warranties about the information being complete or free from errors or inaccuracies. Sykes shall not be liable for any loss or damage arising under or in connection with your reliance on it.
