Welsh Gov Proposes Relaxing Holiday Let Tax Rules

The Welsh Government is set to relax controversial tax rules for holiday let owners if new proposals put forward for consultation are adopted.

In what could be considered an admission that the current rules are too harsh, Cabinet Secretary for Finance and Welsh Language Mark Drakeford explained the Welsh government had "listened" to feedback and was proposing "small changes" to the rules.

The rules came into force in 2023, and demand self-catering rentals must be available to let for 252 days a year and let to visitors for 182 days. Owners with homes that passed the occupation test are allowed to pay non-domestic rates instead of the much higher council tax.

Some holiday lets have reportedly attracted council tax bills of more than £5,000 a year.

Official figures reveal 40 per cent of the 10,070 holiday lets in Wales have failed the occupation test.

Threat to jobs

Many are worried that jobs are at risk as owners withdraw self-catering homes for tourists. Statistics suggest tourism accounts for 159,000 jobs, or nearly 12 per cent of Welsh jobs.

Now Drakeford, who was leader of the Welsh Labour government when the holiday let rules were introduced in 2023, wants to make changes:

• Allow holiday let owners average their 182 days over several years, so that those who just miss the target stay on non-domestic rates.
• Allow owners to give free holidays of up to 14 days a year to charity while counting the days towards the 182-day target.
• Give councils the power to give holiday letting businesses up to 12-month grace periods before they pay council tax rates when failing the occupation test.

Fair contribution

Drakeford said: "Tourism makes an important contribution to the Welsh economy and to Welsh life. Wales has so much to offer, and we want to ensure we realise that potential in a way that achieves a balance between our communities, businesses, landscapes and visitors.

"We work closely with tourism and hospitality businesses to help address the challenges they face, while ensuring everyone makes a fair contribution towards local economies and funding public services.

"While most holiday let owners are already meeting the new rules brought in from 2023, with 60 per cent of properties meeting the letting criteria, we have listened to those working in the sector and are proposing small changes to the current rules to support them."

Publication of the consultation met with a mixed response.

Many, including Welsh Conservative leader Gareth Davies, criticised Drakeford's action.

"Tinkering will not help struggling businesses", said Davies, while the Professional Association of Self-Caterers (Pasc) also criticised the latest announcement, calling it a "token gesture that fails to address the real crisis facing Welsh tourism businesses."

Drakeford's political allies, Plaid Cymru, welcomed the "increased flexibility" but supported setting the occupancy test at the most suitable level.

The consultation closes on November 20