These FAQs come under a few headings: 

• General, 
• Business Rates Threshold Changes, 
• Council Tax Premiums, 
• Tourism Levy; and 
• Registration/Licensing Scheme. 

General

Q. What benefits do short term lets bring? 

In 2023 the Welsh Government's statistics state that GB residents took 8.44 million overnight trips in Wales with 24.47 million nights and £2.02 billion spent during these trips. 

In our engagement with governments, we highlight these stats and make the following points, and more.  

The report we commissioned from Oxford Economics, shows that in 2021, short term let linked activity contributed £3bn to the Welsh economy, supporting 65,000 jobs, many in rural communities. The report also showed STLs have a negligible impact on house prices accounting for a 0.7% increase between 2015-9. 

With this level of demand it is better for second homes which exist to be let out than to sit empty. Out of a total UK second home market of 550,000, only around 170,000 are rented out, meaning that only around 30% of owned holiday homes are rented. 

Second homes which are rented out to guests provide an estimated 6x more economic benefit to the local community than those which merely sit empty for most of the year (research by Finest Retreats).

Self-catering accommodation has ecological benefits, too: since tourism is vital to the Welsh economy, tourists have to stay somewhere. Hotels tend to have a much larger carbon footprint than short-term accommodation due to their 24/7 servicing. Short-term rentals, which are comprised of individual homes or units, are also better equipped to conserve energy and water. They also make use of the existing housing stock instead of requiring the carbon-intensive building of hotel facilities. 
 

Business rates threshold changes
 
Q. What is the change in business rates thresholds? 

For your property to be eligible for business rates, you have to show that, as at the date of the Valuation Office Agency’s (VOA) assessment form you complete, your property: 

• was available to be let for 252 days in the year to that date; 
• was actually commercially let for 182 days in the year to that date; and 
• is going to be made available to be let for 252 days in the following year from that date. 

Note, the period is just the 12 months up to the date you/the VOA are looking at it. It is not about how many days let in a financial year 1 Apr – 31 Mar. More information on reaching those thresholds and what to do when you is available on our business rates update here and a flowchart of the application process is here. 
 
Q. Do free stays for family/friends count towards the thresholds? 

No, lets have to be with a view to making a profit. Any non-commercial lettings, for example lettings to family and friends for free or for nominal amounts, should not be counted towards the thresholds.

Business Wales guidance (link here) notes: to be commercially “will usually mean the property being let at market rates and actively advertised; for example, using holiday cottage websites, estate agents, tourist boards, Visit Wales webpages.” 

Previously they’ve stated: “It is recognised that reduced low season price lettings may produce little or no profit but this letting may still be treated as commercial depending on the specific circumstances, for example the receipts could help towards the cost of maintaining the property during quieter periods.”  

As long as you are covering your variable costs e.g. laundry, energy and anything else incurred for that particular visit, and with at least a little going towards your annual fixed costs e.g. mortgage repayments, insurance etc, you could argue it is helping your profit margin for the year as a whole. So for example, assuming your property is actively advertised, if in winter months a couple of your bookings were where you gave a connected party a 25% discount from your peak rate, done on an arms length basis (e.g. asking guests to sign a basic set of terms with you and email them to confirm their booking), provided it’s still helping you make a profit for the year, it could be argued those bookings should be included. 
 
Q. Is renting to family or friends at a nominal rate breaking the law? 

No, but if you want those stays to count towards the thresholds you would need to disclose that rate on the VOA form (for which you are signing to say the information is accurate) and so it is better not to include those days in your 182 unless you rent to family/friends at a more commercial rate. 
 
Q. Is the threshold measured in nights or days? 

The legislation states it is days so 182 days and 252 days. A day counts if the booking covers just before midnight at the end of that day. E.g. a Fri pm to Sun am booking, only the Fri and Sat would count because just before midnight on the Sun the booking has already finished. 
 
Q. Can we average the number of let days across two or more properties? 

Yes, but only if the properties are situated at the same location or within very close proximity of each other as part of the same or connected businesses e.g. two cottages on the same farm. Even with the averaging option, the Business Wales guidance linked above states: "the commerciality criteria must be met. For example, if a property has only been let for ten days, this might meet the average requirement but not be considered as a commercial letting” and so not be eligible for business rates.

The guidance doesn’t explain the commerciality criteria but, linking back to the nominal rates point, we believe it likely means that each individual property at the business must on its own be aiming to be profitable i.e. a holiday let in its own right with a view to realising a profit and available to let for a commercial rate for at least 252 days a year. 
 
Q. If the property only just misses the threshold for business rates is there tapered business rates/council tax? 

If a property doesn’t qualify for business rates, it is liable for council tax instead. It is a hard and fast rule; there is no grading of it i.e. pay 50% business rates and 50% council tax. It's a switch to full council tax. 
 
Q. How will the Valuation Office Agency (VOA) continue to assess whether a property should remain on business rates? 

The VOA aim to assess short term lets that are registered for business rates at least once every two years. You are supposed to tell the VOA if you no longer meet the threshold in any rolling year since the date of your last assessment for rates. When the VOA assesses you it sends you a form (linked here) which asks for the minimum and maximum amounts you let out the property for and how many days it was available and let out.

It refers to the financial years (1 Apr - 31 Mar), partly because they also use this form to work out ratable value of properties, but feel free to put an asterisk and the days your property was let and available in the 12 months up to the date you're completing the form as this is what the law requires.

They invite you to provide evidence, but this is not mandatory. Once they receive your form, they could ask for evidence that you let it out as you say you did. Your Sykes/brand’s statements with accompanying narrative should be sufficient evidence but you should keep a record of any lets you organise instead, time your family or friends stay there for nominal amounts and keep evidence relating to those lets such as financial transactions in and out for the holiday let and emailed bookings. This all goes to help show the commerciality of the holiday let.
 
Q. If the property meets the thresholds one year, does not meet them the next and then does meet them in the third year, will the property be in and out of business rates / council tax or is there some kind of relief? 

There is no published relief and the VOA would likely put the property on council tax for the middle year (so backdating the council tax for that year and cancelling your business rates bill for that year). If the VOA didn’t assess you until 3 years after their previous assessment, their view could well be that you should have notified them for the year you didn’t meet the threshold. So on any given day you need to check you meet the threshold for the year up to that date in case they assess you. You can see on the Sykes/your brand’s owner app/portal the number of days your holiday let has been booked in a certain period by going to "Bookings" and looking in the “Performance” box, change the “range type” to "custom range".
 
Q. What if my property doesn’t meet the threshold because of e.g. a pandemic? 

There are no published exemptions to the business rates thresholds and little sympathy has been had by the authorities for those who did not meet the threshold during the pandemic so the property would be liable for council tax. It would be the local authority’s discretion whether to remove or reduce any applicable council tax premium or even the standard council tax in those circumstances. Should you be on council tax in those circumstances you may want to call the local authority in which the property lies and ask them to reduce the council tax. 

If your property is flooded or for another reason requires or is undergoing major repair work or structural alteration it could be exempt from council tax for 12 months. 
 
Q. My property is currently on council tax but I am thinking of getting in touch with the VOA to move onto business rates. How do I do that? How much would business rates be? And when would the business rates be calculated from? 

You apply for your property to be moved to business rates once it meets both the 182 and 252 day thresholds by using this form. You can get an estimate of a business rates bill for your property at https://www.gov.uk/find-business-rates.  Note, you may qualify for small business rate relief which the calculator should tell you. If you don’t, there is 40% relief for hospitality businesses in place for 2024-5, capped at £110,000 per business, and it has been announced it will continue in 2025-6.  
The business rates would be calculated from the date you met both the 182 and 252 day thresholds. For more info, see our flowchart of the application process here.
 
Q. Does a late cancellation count towards the threshold? 

We have asked this question of the Local Taxation team at the Welsh Government (i.e. is this on the basis of a booking made or a booking actually taken) but they have said no, it is the let needing to be made and kept in place. If the let is cancelled it doesn’t count. We have emphasised that it is unfair to not treat a last minute cancelled booking as let where a re-let is attempted but not proved possible given it is about assessing whether a property is a business. We continue to engage government on this point. 
 
Q. If our property doesn’t qualify for business rates because it does not reach the thresholds, can we still offset our expenses? 

Whether your property is liable for business rates or council tax does not affect your ability to offset expenses as that is part of a different tax regime. You should speak to whoever usually advises you on tax issues or feel free to contact our preferred partner Zeal. See link here. 
  
Q. Is it worth applying for business rates for a holiday annex which is attached to our home? 

You should speak to an accountant or tax advisor such as Zeal, but if the annex is given its own council tax listing (separate to your home's listing), yes, you quite probably should apply for business rates for any part of property you’re letting out commercially as long as: 

• you meet the thresholds for days; and 
• you have permission to let out from a planning perspective. 

If your property doesn’t qualify for business rates, your council might exercise its discretion not to apply any council tax premium that applies in the area if the annex is not suitable for permanent living. See below for information on council tax premium exemptions.  
 

Council tax premiums
 
Q. What is the change in council tax premiums? 

Since 1 April 2023, for second homes, Welsh local authorities have been able to set council tax premiums of up to 300% (i.e. x4) of any council tax payable. 
 
Q. What is a second home for the purpose of council tax premiums? 

The second home premium is for properties that are substantially furnished and which are not your sole or main residence (whether or not your main residence is in the UK) so includes holiday lets that aren't on business rates. 
 
Q. When will we know whether a local authority is going to set a premium or increase their premium? 

The first time a local authority introduces a council tax premium it has to give a year’s notice ahead of the beginning of the financial year in which the premium will first apply. The financial year runs from 1 April to 31 March and so if a local authority wants to bring in its first premium for the 2025-26 council tax year it would need to have announced as such before 1 April 2024. 

If the local authority already has a council tax premium and wants to increase it for a given financial year, it must announce it prior to that financial year (i.e. before 1 April) and as a public body should act reasonably and so announce in good time beforehand. 
 
Q. Are there any relevant exemptions to the council tax premiums on second homes? 

Currently, local authorities are not allowed to charge a premium in relation to a property where a planning condition: 

• prevents the occupancy of a property for a continuous period of at least 28 days in any one year period; 
• specifies its use as a short-term holiday let only; or 
• prevents occupancy as a person’s sole or main residence (whether on a holiday park or otherwise).  

Additionally, Welsh Government guidance (link here) provides that even if a self-catering property doesn’t fall within one of these exceptions the property might be considered unsuitable for permanent living and local authorities are encouraged to consider using their discretionary powers to reduce or remove the premium. This might be for properties such as: 

• outbuildings or barns converted to holiday lets as part of farm diversification; 
• annexes or garage conversions that form part of an owner’s primary residence; 
• lodges, caravans or chalets.  

So even if in theory you are allowed to live in the property all year, if it is not suitable for permanent living, the local authority has a discretion to reduce or remove the premium. 
 
Q. I currently pay business rates. What would the council tax bill be for the next two to three years for my property if it no longer met the business rates criteria?

Council tax itself normally increases by a few percent each year and so you could estimate what it might be for your property based on the band it would be in for the particular local authority in which it sits. It is hard to predict what the council tax premium might be for each local authority over the next few years. Those councils that have introduced premiums have tended to increase incrementally over a few years but that doesn’t mean local authorities wouldn’t jump to a high level from where they are now. Note that Pembrokeshire have actually lowered their premium from 200% to 150% from 1 April 2025.
 
Q. Does the applicability of building control regulations depend on whether the property is liable for council tax or business rates? 

No, the two systems are separate and building control inspections are supposed to assess a property based on its usage. 
 

Tourism levy
 
Q. Is there going to be a tourism levy? How will it operate?

The Welsh government introduced to the Senedd a Bill on the levy on 25 November 2024.
As it is draft legislation, it needs to be debated in the Senedd and a finalised version agreed upon before it becomes law. We fed in our views to the consultation that closed on 10 January 2025, and continue to do so through evidence sessions and the press, lobbying against the levy in principle and, if it is to come in, to reduce any negative impacts on the tourism sector.

As the draft legislation stands, local authorities would be able to opt in and it wouldn't come into effect anywhere in Wales until 2027 as any local authority that wants to introduce it will have to consult before deciding, and then give 12 months notice following their decision, before it comes into effect in their area.

If the draft legislation does become law and subsequently any council launches a consultation with a view to bringing the levy into effect in their area, we will respond and engage, highlighting the reasons a visitor levy is not sensible.

As such, and as a result of our and others’ lobbying, the proposed mechanics of the levy are likely to change significantly and so we have not set them out in detail here. However, some of the key proposals as they stand are: 

How much would the levy be?
For all visitor accommodation except hostels and camp sites, £1.25 plus VAT per person per night, though individual local authorities would be able to apply a premium. Welsh Government has power to cap that premium. We are lobbying against the premium. 

What about bookings already made?
Levy doesn't apply where booking is made before decision to introduce levy is made.  

When does levy apply? What if the stay is cancelled?  
Levy would apply when the party enters the accommodation. If stay cancelled levy would need to be refunded.  

What is the levy going to be spent on?
If a levy is applied in the council area of your holiday let, the proceeds will be spent in that area; it’s intended to improve facilities and services for visitors so that they keep coming back. We argue a better alternative is to increase tax on empty homes and tax land-banking where new homes with planning permission remain unbuilt. 

How is the levy paid?
A return, and payment, would be made to the Welsh Revenue Authority, annually if owner takes less than £1k in levy (across all owner’s properties) or quarterly if more than £1k.  Returns and payment due 30 days after the end of the year/quarter.  

Whose responsibility is it to collect and pay? 
It is the owner’s responsibility. The draft law states that owners can arrange with a third party (such as Sykes) to collect and pay the levy. The detail of how this would operate is yet to be provided.  

What should I be doing now? 
Holiday let owners need not do anything at the moment. We will update them if and when the draft law becomes actual law.  

You can find more detail of the current proposals here. 

Registration/licensing regime
 
Q. Is there going to be a registration scheme? What would it look like? 

The Welsh Government announced on 9 January 2024 that they would introduce a registration scheme for all visitor accommodation, including holiday lets. They said they would subsequently introduce a licensing scheme and then quality standards after that. 

The draft legislation to bring in a visitor levy (see above) contained provision for the registration scheme. 

The register will be mandatory for all visitor accommodation in Wales and expected to go live in 2026.  
The registration scheme is expected to be set nationally, simple to use, cost effective and enable automatic/instant approval of properties. 

It is proposed that the Welsh Revenue Authority would set up a website. Owners would just provide:  

• their name and address (or if property owned by company the company name and address),  
• property address,  
• type of accommodation it is e.g. whole property, room in their home, yurt, shepherd’s hut, hotel etc.  
• Ministers could add more requirements in due course.  

There is no indication that the fundamental requirements to holiday let in Wales, such as health and safety, are going to change; simply that you would register (providing basic details about the property and owner) and then if a licensing scheme is introduced apply for a licence. 

Q. Is there going to be a licensing scheme? 

For now the Welsh Government have announced very little detail regarding a licensing scheme or the quality standards. 

In the meantime we continue to engage with decision makers to try to ensure the schemes are indeed proportionate (including as to any fee) as hoped. To prepare, you can make use of our health and safety system to store your health and safety documents. It contains links to laws, guidance and template documents, plus the system reminds you when documents are due for renewal. 
 

Please note that these FAQs do not constitute legal, tax or planning advice and should not be taken as such. As always, please read the relevant guidance, including the Business Wales guidance linked above and here yourself. Any summary or FAQs we prepare isn’t a substitute for reading background info and Business Wales’ guidance. We are not liable for any action or decisions you take or do not take as a result of reading these FAQs or any loss suffered as a result.