The government’s crackdown on holiday rentals is finally hitting properties that have been converted from family homes, as officials work to address the housing shortage affecting millions of renters and aspiring homeowners across Britain.
For years, homes have disappeared from the housing market, converted into profitable holiday rentals while local people struggle to find anywhere to live. The new tax rules represent the government’s attempt to reverse this trend and return properties to the housing market.
One Blackpool operator, 75-year-old Judith Robbins, now faces a £20,000 tax bill after six of her holiday flats were reclassified as second homes rather than legitimate businesses. Her Westward Holiday Apartments have been operating since 2002, but tax officials determined that they do not meet the criteria for business rates relief.
The policy change addresses a critical problem: properties that could house local families have been removed from the residential market for tourism profits. In some coastal and rural areas, this conversion has priced out entire communities.
Under the previous system, many holiday let operators paid minimal business rates while contributing to local housing shortages. The new rules require properties to prove they operate as genuine businesses rather than occasional rentals or second homes that avoid proper taxation.
Mrs Robbins previously paid just £3,500 annually in business rates and received small business relief. Now classified as second homes, her properties face the full £9,000 yearly council tax burden – reflecting their true impact on local housing supply.
The scale of the problem
Since 2023, thousands of properties have been deemed to be improperly claiming business rates while functioning as second homes or occasional rentals, and over 9,000 properties across England have been reclassified from holiday lets back to residential taxation.
The reclassification process aims to identify properties that operate sporadically rather than as full-time businesses and effectively remove housing stock while driving up property prices.
Impact on local communities
Tim Farron MP explains the devastating effect on local families in areas like the Lake District: “Communities like ours have a situation where so many properties are gobbled up by non-permanent residents that there is nowhere for local people to live. You lose your primary schools, secondary schools, GPs … you lose your communities.”
Over 50% of housing in some Lake District areas has been converted to holiday lets or second homes, making it impossible for:
- Young people to buy their first homes;
- Families to find rental properties they can afford;
- Key workers like teachers and nurses to live where they work;
- Local businesses to find staff who can afford to live nearby.
The Valuation Office Agency (VOA) is reviewing holiday let properties to determine if they qualify for business rates or should pay council tax as second homes. Properties that do not meet genuine business criteria – such as consistent year-round letting or sufficient occupancy rates – get reclassified.
Property owners can appeal against reclassification decisions, with cases reviewed by the VOA, although this can take up to six months. Local councils can pause debt collection for up to 90 days during an appeal.
The VOA is due to be shut down in 2026 and its functions merged into HM Revenue and Customs.
Legitimate vs. exploitative operations
The new rules distinguish between genuine holiday businesses that serve tourism economies and property speculation that harms local housing markets.
Legitimate holiday businesses typically:
- Operate year-round with consistent bookings;
- Employ local staff and contribute to community economies;
- Meet specific occupancy and income thresholds;
- Provide specialised tourist accommodation.
Properties reclassified as second homes often:
- Operate intermittently or seasonally;
- Generate rental income while claiming business tax relief;
- Could reasonably serve as family homes;
- Contribute to local housing shortages.
Local MPs are working to ensure the policy achieves its housing goals while minimising disruption to legitimate tourism businesses. Blackpool South MP Chris Webb has raised concerns about cases where longstanding operators may be unfairly caught out by the new rules.
However, the primary focus remains protecting local communities from further housing loss.
These tax changes form part of wider efforts to address Britain’s housing concerns. There are currently 1.3 million families on social housing waiting lists and 160,000 children living in temporary accommodation. Home ownership is unaffordable for many, while renters pay an unsustainable proportion of income for housing.