Author: Matthew Jeffery, Tax Director
On 19 February the Department for Levelling Up, Housing and Communities announced new rules that will govern holiday lets and ‘Air BnB’ type rentals.
The change in reforms will require planning permission for future short term lets, introduce a mandatory national register of short-term lets and give councils greater powers to control short-term lets in their areas.
But what does this mean for those who own and manage holiday letting properties?
What are the new rules?
Over the last 12 months there has been widespread coverage across national and regional media of the new changes to short-term lets rules.
Under the new reforms short-term let’s of more than 90 days per year will be subject to the planning process, plus a mandatory national register will allow local authorities to keep track of how many short-term lets are in the area and whether these properties meet the new requirements.
Although it has not been confirmed when the new rules will be introduced, it is likely that they will come into effect in summer 2024 – peak season for most holiday rentals.
In summary the rules state:
- Planning permission will be required for future short-term lets.
- Mandatory national register will provide valuable information and help ensure accommodation is safe.
- Proposals will give communities greater control over future growth.
- Homeowners can continue to let out their own main or sole home for up to 90 nights a year.
The Government have rationalised the new rules by claiming that they are designed to give those letting holiday properties clear rules and guidance, while at the same time giving local authorities access to reliable information that they need to assess housing impacts within their regions. The aim is to support local people in tourist hotspots, where high numbers of short-term lets are preventing them from finding housing they can afford to buy or to rent.
The rules will not, however, apply to hotels, hostels, B&Bs, or existing short-term lets, which will instead be reclassified.
What does the change mean for existing owners?
The proposed planning changes would see a new planning ‘use class’ created for short-term lets or properties not used as a sole or main home. For existing owners, their properties will be automatically reclassified into the new use class and will not require a planning application.
Zeal’s Managing Director, Matt Jeffery comments….
“For existing owners, this is positive news as restricting supply of new holiday lets will reduce competition, ensuring occupancy and price levels can be maintained. It could even result in higher prices long term, if demand is greater than supply and increase in value of properties with licences”.
“On the downside, existing owners will now face increased challenges to add new properties and grow their business”.
For those new to holiday letting the ‘Permitted Development Rights’ will allow for the change of use from a ‘residential dwelling house’ to a short-term let and vice versa. However, where local authorities (LAs) deem there to be an issue, they may use the new mandatory national register and new powers to remove the permitted development rights via an Article 4 Direction, providing the LAs can evidence an issue within the geographical area.
Further details of the new measures will be set out in the Government’s response to the consultations, including the timeline for implementation of the register, the use class and the individual permitted development rights – with the changes being introduced from this summer.
What can owners do?
Short-term lets are a significant and important part of the UK’s visitor economy. They provide increased choice and flexibility for tourists and business travellers. With around 450,000 short lets in the UK a significant number of landlords will be both affected and confused by these changes.
If you are considering starting a holiday let business or expanding your existing business, we would recommend you accelerate the process and start letting before the changes come into force. If this is not practical, we would recommend making contact with your local council as early as possible to understand the process and their specific requirements to obtain a licence.
Zeal Tax are specialists within the holiday letting sector and can provide advice to owners to help them navigate these changes and tax advantage of tax reliefs to mitigate any negative impacts. With a specialism in Capital allowances tax relief, our team can ensure that owners only pay the right amount of tax.
For advice call 01633 287898 or email info@gozeal.co.uk.
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