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The "No Council Tax" Hack: Unlocking Small Business Rates Relief for Holiday Lets
- DNB Future Properties
- 3 days ago
- 4 min read
Prefer to read the full guide? Download the full guide here.
We have talked about regulations and revenue in our previous posts.
Now, let’s talk about expenses.
One of the biggest silent killers of rental yield in the UK is Council Tax (during voids) and the inability to deduct expenses efficiently under Section 24.
But there is a solution.
Pivoting to a Furnished Holiday Let (FHL) doesn't just change your income; it changes your tax status from "Investment" to "Trade." This shift opens the door to Small Business Rates Relief for Holiday Lets. A benefit that can save you thousands every year.
Say Goodbye to Council Tax
Standard residential properties pay Council Tax.
This is a local tax based on the property value, and for Buy-to-Let (BTL) landlords, it is a sunk cost—paid either by the tenant or by you during costly void periods.
However, the rules change when you operate commercially. If your property is available for short-term letting for 140 days a year and actually let for 70 days, it becomes a furnished holiday let which is classified as a commercial business.
This means your property moves from the Council Tax register to the Business Rates register.
How Small Business Rates Relief for Holiday Lets Works
Most individual short-term rental properties (like apartments or small houses) have a "Rateable Value".
1. Small Business Rates Relief (SBRR) Rules
100% Relief: If your property in England has a rateable value of £12,000 or less and it is your only business property, you can qualify for 100% Small Business Rates Relief.
Tapered Relief: If the rateable value is between £12,001 and £15,000, the relief reduces gradually from 100% to 0%.
Application Required: This relief is not automatic; you must apply through your local council.
2. Structuring as a Furnished Holiday Let (FHL)
For a property to qualify for business rates (instead of Council Tax) and therefore be eligible for SBRR in England, it must meet specific commercial letting criteria:
It must be available for letting for 140 days or more per year.
It must be actually let for 70 days or more per year.
3. Does it Drop Tax Liability to Zero?
If your property qualifies for 100% SBRR, your business rates liability drops to zero.
Important Caveats:
It is not automatic: You must apply for the relief.
Only one property: Relief is usually only available if you occupy only one business property.
Other locations: Rules differ in Wales (100% relief only up to £6,000 RV) and Scotland.
Future Tax Changes: While the FHL tax regime (income/capital gains tax perks) is changing from April 2025, the ability to claim SBRR on business rates remains (At the time of writing).
The Result:
• Buy To Let (BTL) Cost: £1,500 - £2,000 per year in Council Tax (a permanent drag on your yield, especially for HMO landlords).
• Furnished Holiday Let (FHL) Cost: £0 per year thanks to Small Business Rates Relief (if your property qualifies).
Better Expense Deduction
The benefits don't stop at local taxes.
Small Business Rates Relief for Holiday Lets categorises you as a trade, you unlock other efficiencies:
Replacement Costs: You can deduct the cost of replacing domestic items (e.g., sofas, fridges) on a "like-for-like" basis.
Operating Expenses: Costs for utilities, internet, and cleaning are generally deductible as business expenses.
You Must Hit the 70-Day Rule
You cannot just say it’s a holiday let to get these perks. You have to prove it.
To qualify for Small Business Rates Relief for Holiday Lets, you must meet the "70-Day Rule": you must have paying guests in the property for at least 70 days of the year. If you fail this test, you may be moved back to Council Tax, and you will lose the benefits.
This is why professional management is key—to ensure you never miss that occupancy target.
Ready to see how to make the switch?
Want to get started alone?
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