Local authorities face escalating financial losses, with owners exploiting a loophole by registering second homes as holiday lets to avoid council tax premiums introduced under the 2023 Levelling Up and Regeneration Act. The loophole has doubled lost revenue to £334 million, raising concerns over funding for local services and affordable housing.
Local authorities are facing significant financial losses due to a loophole that enables second home owners to sidestep substantial council tax bills. According to recent estimates, this loophole could cost councils an astonishing £334 million. Under the provisions of the 2023 Levelling Up and Regeneration Act, local councils in the UK gained the authority to enforce a 100% premium on council tax for second homes. In particular regions of Wales, this premium can soar up to 300%. However, many property owners have manoeuvred around this by registering their second homes as holiday lets. To qualify for business rates relief—thus completely exempting them from council tax—owners need only to rent their properties for 70 nights a year while making them available for 140 nights.
Research from property consultancy Colliers underlines that the loss of council tax revenue has doubled within a year, escalating from £170 million. Critics of the policy, including Shadow Housing Minister Kevin Hollinrake, argue that these measures have backfired, exacerbating existing problems. Hollinrake pointed out that there was no thorough impact assessment conducted and urged the government to tailor their approach to address localised housing issues more effectively. Similarly, John Webber from Colliers remarked that the current situation is “making the situation even worse”, highlighting concerns over decreased financial resources for vital local services and affordable housing initiatives.
Politicians are seemingly enacting policies without a comprehensive understanding of the ramifications. A notable statistic reveals that 230 out of 296 councils in England and 20 out of 22 councils in Wales have chosen to impose this elevated tax. However, the rapid rise in the number of properties registered as holiday lets has led to a marked increase in the number of owners opting to pay business rates instead of council tax. For instance, the number of holiday lets registered for business rates surged from 63,000 in 2020 to 78,000 by 2024. This shift is particularly significant in popular tourist regions like Cornwall and Dorset, where properties that have a rateable value below £12,000 can benefit from a 100% discount on business rates, rendering such arrangements financially advantageous for owners.
In January 2022, the UK government attempted to address these concerns by introducing new rules requiring evidence that second homes are genuinely rented out to qualify for the business rates relief. These regulations, effective from April 2023, aim to ensure second homeowners make a fair contribution to local services while tackling the issue of properties left vacant and effectively removed from the housing market. Nevertheless, the question remains whether these measures will be sufficient to rectify the challenges faced by local councils grappling with dwindling revenues.
While the government may believe these regulations will rein in exploitation, critics argue that they may merely scratch the surface of a far more complex housing crisis. Addressing this dilemma requires not just regulatory action but a nuanced understanding of local housing markets, as well as a willingness to engage in more targeted, community-focused policies.
Reference Map:
Source: Noah Wire Services
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
7
Notes:
The narrative presents recent data, including estimates of £334 million in council tax losses due to second home loopholes. However, similar reports from July 2023 estimated a £170 million loss ([colliers.com](https://www.colliers.com/en-gb/news/05-07-23-holiday-homes-tax-loophope-rating?utm_source=openai)), and from July 2024, £172 million ([colliers.com](https://www.colliers.com/en-gb/news/25-07-24-government-council-tax-attack-on-second?utm_source=openai)). The £334 million figure appears to be an updated estimate, but the narrative does not specify the source or date of this new estimate, raising questions about its freshness. Additionally, the narrative references a press release from the UK government dated 14 January 2022 ([gov.uk](https://www.gov.uk/government/news/gove-closes-tax-loophole-on-second-homes?utm_source=openai)), indicating that the core information has been available for over three years. The lack of a clear publication date for the £334 million estimate suggests potential recycling of older content. The narrative includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged.
Quotes check
Score:
8
Notes:
The narrative includes direct quotes from Shadow Housing Minister Kevin Hollinrake and John Webber from Colliers. A search reveals that similar statements from Hollinrake and Webber have been reported in previous articles, such as those from July 2023 ([colliers.com](https://www.colliers.com/en-gb/news/05-07-23-holiday-homes-tax-loophope-rating?utm_source=openai)) and July 2024 ([colliers.com](https://www.colliers.com/en-gb/news/25-07-24-government-council-tax-attack-on-second?utm_source=openai)). The exact wording of the quotes varies slightly across sources, indicating potential paraphrasing or updates. No exact matches for the quotes were found, suggesting they may be original or exclusive content.
Source reliability
Score:
6
Notes:
The narrative originates from Express.co.uk, a UK-based news outlet. While Express.co.uk is a known publication, it is often considered less reputable compared to established outlets like the BBC or The Guardian. The reliance on a press release from the UK government dated 14 January 2022 ([gov.uk](https://www.gov.uk/government/news/gove-closes-tax-loophole-on-second-homes?utm_source=openai)) adds credibility to the information presented. However, the lack of additional sources or corroboration from other reputable outlets raises concerns about the reliability of the narrative.
Plausability check
Score:
7
Notes:
The narrative discusses the impact of second home loopholes on council tax revenues, citing a £334 million loss. This aligns with previous reports estimating losses of £170 million in July 2023 ([colliers.com](https://www.colliers.com/en-gb/news/05-07-23-holiday-homes-tax-loophope-rating?utm_source=openai)) and £172 million in July 2024 ([colliers.com](https://www.colliers.com/en-gb/news/25-07-24-government-council-tax-attack-on-second?utm_source=openai)). The figures are plausible and consistent with known data. However, the narrative lacks specific factual anchors, such as names, institutions, and dates, which would strengthen its credibility. The tone and language used are consistent with typical reporting on this topic, and there are no excessive or off-topic details.
Overall assessment
Verdict (FAIL, OPEN, PASS): OPEN
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The narrative presents updated data on council tax losses due to second home loopholes but lacks clear sourcing for the £334 million estimate, raising questions about its freshness and originality. The reliance on a press release from January 2022 and the absence of corroboration from other reputable outlets further diminish the reliability of the information. While the figures are plausible and consistent with previous reports, the lack of specific factual anchors and the potential recycling of older content warrant further scrutiny.
