Second homes, higher stakes: the changing landscape for buy to let properties

Second-home ownership is no longer a passive investment. Whilst demand has held up with reported stable occupancy and record average rates and revenues in June 2026, regulation and an increased tax burden needs to be carefully considered to ensure that investments remain viable.

Tax, business rates and rising costs

Prior to the 2026 Budget there were fears that holiday lets might be moved into the council tax regime which potentially would have rendered some small holiday let businesses unviable, particularly if the second home premium (see below) was applied to the council tax bill.

Beleaguered holiday let owners will have breathed a sigh of relief when such pre-Budget speculation came to an end. . The Budget 2026 did not move English holiday lets wholesale into council tax. A genuine self-catering property can still fall within business rates if, in the same 12-month period, it was commercially available for at least 140 nights and actually let for at least 70, with an intention to offer 140 nights in the following year.

Private use, discounted family stays and bookings exceeding 28 nights do not count towards the 70.

The Budget did, however, raise individual property-income tax rates to 24%, 44% and 49% from April 2027. For £2 million-plus homes, the separate High Value Council Tax Surcharge remains due from April 2028.

Spousal transfers: making the most of tax allowances

Married couples and civil partners may be able to make use of differing income tax rates as an effective tax planning opportunity to mitigate the increase in income tax rates on rental income.  By transferring beneficial ownership of rental properties, or a proportion of the beneficial interest, from the higher-earning spouse to the lower-earning spouse, rental income can potentially be taxed at the lower spouse’s marginal rate, making better use of their basic rate tax band.  Where properties are jointly owned, this may involve severing the joint tenancy so that the property is held as tenants in common, and putting in place a declaration of trust setting out the unequal beneficial ownership.  Advice should always be taken before transferring ownership of properties to avoid any unintended tax consequences, particularly if there is a mortgage.

Council tax premiums and proving holiday-let status

Properties failing the rating tests normally remain in council tax. Since April 2025, an English billing authority may charge up to a 100% second-home premium—doubling the standard bill — on a substantially furnished dwelling with no resident. Mandatory exceptions include limited periods for probate and genuine marketing for sale or residential letting, together with certain annexes, job-related homes and planning-restricted seasonal accommodation.

Cornwall, which charges the full premium, says switches from second-home status to holiday-let/business-rates treatment increased after the premium began; it is pressing for restrictions on retrospective reclassification.

Changing the label is therefore not enough: in order to evidence qualification, holiday let owners need robust booking, advertising and receipt evidence. A mandatory national short-term-let register is expected from March 2027 increasing the administrative burden involved in operating a holiday let business.

The risks of winter lettings

The sharper trap is residential occupation. A genuine holiday letting is excluded from assured-tenancy status. But letting the property to one person for the fallow six winter months as their only or principal home may create an assured periodic tenancy, whatever the agreement is called. Since 1 May 2026 and the introduction of the Renters Rights Act, fixed end-dates and section 21 no-fault possession no longer work for assured tenancies; there is no specific ground simply to recover the property for the more lucrative summer holiday letting season.

Many summer tourist hotspots won’t have sufficient visitors over the winter months to sustain genuine holiday let businesses putting some in peril now that properties can’t be let on a longer term basis over the winter.

The practical message is simple: model tax, rating, planning, mortgage, insurance and possession consequences before changing use—and do your research and planning before exchange if thinking of buying.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

Meet the team:

1. 

   • Emma Sear

   • Partner
   • Residential Property

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2. 

   • Emily Minett

   • Senior Associate
   • Private Client

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