From 1 April 2025, many UK councils will introduce a new policy that could significantly impact Airbnb hosts and other short-term rental property owners: double council tax on second homes.
If you own an Airbnb property, this could mean a sharp increase in your expenses. However, luckily there are legal and strategic ways to mitigate or even avoid this additional tax burden.
In this comprehensive guide, we’ll explore your options and how you can take proactive steps to keep your Airbnb business financially viable and give you options on how to avoid the new charges.
Why are councils introducing this charge?
Starting April 2025, councils across the UK will now have the power to charge up to double the normal council tax rate on second homes. This change is designed to discourage properties from sitting empty and encourage more long-term rentals. Even though your Airbnb isn’t technically empty, councils are still treating them as such.
Local authorities argue that the rise of short-term rental properties has reduced the availability of housing for local residents. With rising housing costs and a shortage of rental properties, councils are looking for ways to incentivise long-term rentals and homeownership. By imposing double council tax, they hope to make short-term lets less attractive while increasing revenue to fund local services.
While short-term rentals have faced criticism, they also bring substantial benefits to local communities such as boosting the local economy, and supporting Local Employment. However, councils are ignoring these benefits and are instead concentrating on revenue generation for their respective council.
Business or residential rates?
If your property is classified as a second home and does not qualify for business rates, you could face a significantly higher tax bill. The key to avoiding this lies in reclassifying your property as a business rather than a domestic residence.
Here you have 2 main options which I’ll explain to you below.
Option 1: Switch to Business Rates Instead of Council Tax
One of the best ways to avoid the double council tax is to get your property classified under Business Rates rather than Council Tax. Several of our clients have taken this step and some have found it financially advantageous. I would recommend that you speak to your accountant or tax advisor as they may have local experience with clients in a similar position to you and they are more likely to know the disparity between council tax and business tax rates in you area. They will also be able to advise you if it’s financially advantageous for you to make the switch.
To be considered for business rates, your property must:
- Be available for rent for at least 140 days per year
- Be actually let out for at least 70 days per year
Properties in most English cities will be able able to do this, as of April 2025, the exception is London which is subject to the 90 day rule. In London, you would need planning permission for periods that add up to more than 90 nights during any calendar year.
The business rate conditions are set by the Valuation Office Agency (VOA). If your property meets these criteria, it can be classified as a self-catering unit, allowing you to pay business rates instead of council tax.
Business Rates are charged on commercial properties like shops, offices, and warehouses based on the rateable value (RV) of the property, set by the Valuation Office Agency (VOA). A multiplier (set by the government) is then applied to calculate the final bill. Your accountant may be able to help you calculate the business rates for your property.
How to apply for business rates.
The first step is to contact the Valuation Office Agency (VOA) – You need to submit an application to have your property reclassified.
The first step is to download and fill in the VOA Self-Catering Business Rates Application from the VOA website. Once complete, email it to [email protected]. It’s supposed to take 90 days for the form to be processed but our clients are advising us that the process takes up to 5 months so if you want to go down this route, it’s best to start early!
Once the VOA processes your request, they will provide you with a new business rates valuation. However, you can search the VOA database which will give you an indication of the rateable value of similar sized properties in your area. Once you have the valuation, you will need to contact your council business rate line to inform them and they will be able to calculate your business rates.
Apply for Small Business Rate Relief (SBRR)
The second step is to apply for SBBR. Many Airbnb owners qualify for SBRR, which could reduce your business rates to zero depending on your property’s rateable value. Contact your local council’s Business Rates department to apply for SBRR once your property is reclassified.
Additional Financial Benefits of Business Rates
You may qualify for further reliefs, such as the Retail, Hospitality and Leisure Relief, which can reduce rates by up to 50%. Business rates are often lower than council tax, even without additional reliefs. Even if the business rates are identical to council tax, it is still half the double council tax on second homes.
Option 2 - Transfer Ownership or Change Property Use
For some property owners, restructuring ownership or usage may provide a viable tax-saving strategy. If you own multiple properties, placing them under a limited company might provide tax benefits. By registering your property portfolio as a company, you may pay corporation tax instead of personal income tax on rental earnings, reduce your overall tax liability by deducting expenses and reinvesting profits and protect personal assets from liability. It’s a good idea to speak to your accountant or tax advisor as they will be able to advise on your specific circumstances and will often have experience in your area with people in a similar position to you.
You also have the option to convert to Holiday Accommodation. Some councils exempt properties that are operated as dedicated holiday accommodation with proper licensing and planning permissions. Some councils may choose not to impose double council tax, making relocation a strategic financial decision.
Summary
- Apply for business rates – This is the best option to avoid double council tax, especially if you meet the 70-day rental threshold.
- Apply for small business rate relief – Many Airbnb hosts end up paying nothing under this scheme.
- Consider Reevaluating your property ownership or Use – A business structure or different rental strategy might work better for you.
- Consider Relocation – Some councils may impose lower tax rates than others.
- Speak to your accountant / tax advisor who will likely have local knowledge on business and council tax rate disparities.
With careful planning, Airbnb owners can legally avoid the impact of double council tax while continuing to generate income from their properties.
