Andy Burnham plotting new holiday tax raid – £3k per family

Andy Burnham’s Government is facing growing questions over a possible tax shake-up that could leave some holiday-let owners facing thousands of pounds in additional costs.

The proposal, which is being considered ahead of Chancellor John Healey’s first Autumn Budget on October 28, centres on the tax treatment of short-term holiday accommodation.

At present, qualifying self-catering holiday lets in England can be treated as businesses for business-rates purposes rather than as ordinary residential properties for Council Tax. Under the current rules, a property generally has to be available for commercial letting for at least 140 nights, actually let for at least 70 nights in the previous 12 months, and intended to be available for at least 140 nights in the following 12 months.

The Government is now examining whether those arrangements should be changed.

And while ministers have not confirmed that a new tax will be introduced, the possibility has already prompted warnings from holiday-let operators that the financial consequences could be significant.

Alistair Handyside, chairman of the Professional Association of Self-Caterers, has estimated that moving properties away from business-rates treatment could add between £1,000 and £3,000 to the annual cost of running some holiday lets.

That is where the “£3,000 per family” warning comes from.

It is not a confirmed charge on families booking holidays, nor has the Government announced a £3,000 holiday tax. Rather, it is an industry estimate of the potential additional cost faced by some businesses if their properties are moved into a different tax regime.

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Treasury confirms review

The Government has confirmed that the issue is under active consideration.

In a parliamentary answer published on September 10, Treasury minister James Murray said concerns had been raised about second-home owners using Small Business Rates Relief, arguing that some may use the system primarily to manage their tax liabilities rather than operate a genuine local business.

Murray said the Treasury was “carefully considering” representations received following its call for evidence on the tax treatment of short-term lets, including self-catering accommodation. The Government said a response would be published in due course.

That wording is important.

It means ministers have acknowledged the issue, but there is currently no confirmed announcement that all holiday cottages will be transferred to Council Tax.

The final decision will be a matter for the Chancellor at a fiscal event.

The Treasury has also stressed that tax decisions will be announced by the Chancellor rather than confirmed through speculation about possible Budget measures.

Why the tax difference matters

The distinction between business rates and Council Tax can be substantial.

Under the current English rules, a qualifying holiday-let property is assessed for business rates rather than Council Tax. If it has a sufficiently low rateable value and the owner meets the relevant conditions, Small Business Rates Relief can reduce the business-rates bill to zero.

A property that does not qualify, however, can be subject to Council Tax.

Second homes can also face a Council Tax premium. Government guidance states that councils can charge up to twice the normal Council Tax on second homes, depending on local rules.

That creates a potentially important difference for owners of small holiday cottages.

For some operators, particularly those running one property as a supplementary source of income, a move from business rates to Council Tax could materially change the economics of the business.

The Government’s argument is that the system should distinguish between genuine hospitality businesses and second-home owners who use holiday letting arrangements primarily to obtain favourable tax treatment.

The industry argues that the distinction is not always straightforward.

Small businesses could be caught

Handyside has warned that many holiday-let businesses are not large corporate operations.

Instead, the sector contains individual owners who operate one property alongside another job, retirement income or family responsibilities.

The Professional Association of Self-Caterers has argued that additional costs could make some properties commercially unviable.

If owners respond by withdrawing properties from the holiday market, the consequences could extend beyond the owners themselves.

A cottage that disappears from the short-term rental market means fewer beds for tourists.

That can matter particularly in rural and coastal areas where hotels and large-scale accommodation are limited.

Local pubs, restaurants, cafés, independent shops, attractions and other tourism businesses can all depend on visitors staying overnight rather than simply passing through.

The argument from the holiday-let industry is therefore that a tax change aimed at second-home owners could also affect genuine tourism businesses.

However, the Government’s evidence-gathering process reflects a different concern: whether the existing business-rates system is being used by people whose properties function more like second homes than businesses.

That tension is at the heart of the debate.

The rules have already changed

This is not the first major tax change affecting holiday accommodation.

The Government abolished the Furnished Holiday Let tax regime from April 6, 2025. Since the 2025–26 tax year, income from short-term holiday accommodation has generally been taxed under the ordinary residential property income rules, with the previous FHL-specific tax advantages removed.

The business-rates question is separate.

The current rules determine whether a property is treated as domestic accommodation for Council Tax or as self-catering accommodation for business rates.

The Government has already tightened eligibility requirements in recent years. Since April 2023, properties in England generally need to meet the 140-night availability and 70-night actual letting tests to qualify for business rates.

The fact that ministers are now reviewing the system again suggests that the treatment of holiday accommodation remains politically and financially sensitive.

Pressure ahead of the October Budget

The timing is particularly significant because John Healey’s first Budget is now less than two months away.

The Treasury formally confirmed that the Budget will take place on Wednesday, October 28, and said it would be built around fiscal discipline and the Government’s fiscal rules.

Burnham’s Government is entering the Budget against a difficult economic backdrop.

Reuters reported this week that inflation had risen to 3.1 per cent in August while UK borrowing costs had increased sharply, reducing the Government’s room for manoeuvre. Burnham said he was prepared to make difficult decisions to keep the economy on track.

The Financial Times has likewise reported growing pressure on the Government’s finances, with higher borrowing costs and substantial spending commitments making the choices facing Burnham and Healey increasingly difficult.

Against that background, ministers are examining a range of possible revenue measures.

But the holiday-let proposal illustrates one of the difficulties facing the Government: a measure designed to address perceived tax advantages for second-home owners could also affect small tourism businesses.

Could holiday prices rise?

If holiday-let operators face significantly higher annual costs, there are several possible responses.

Some could absorb the additional expense, reducing their profits.

Others could increase nightly rates.

Some could reduce the number of nights they offer the property.

Others could decide that short-term letting is no longer commercially worthwhile and sell the property or switch it to another use.

None of these outcomes is guaranteed.

Much would depend on the final design of any policy, the level of Council Tax applicable in individual areas, local second-home premiums, the property’s rateable value and whether the owner continues to satisfy the eligibility requirements.

That means the headline figure of £3,000 should not be interpreted as a universal bill facing every holidaymaker.

It is an estimate of the potential additional cost for some operators.

Nevertheless, if a significant number of properties leave the holiday market, there could be an effect on supply and prices in popular destinations.

Government faces competing pressures

The debate highlights a broader challenge for Burnham’s administration.

The Prime Minister has repeatedly presented his Government as focused on economic growth, investment and supporting communities outside Westminster.

At the same time, the Treasury must raise or save money while maintaining its fiscal rules.

That makes policies targeting perceived tax loopholes politically attractive to some ministers, but potentially complicated for businesses operating in the affected sectors.

The Government has already said it wants to support genuine small businesses and investment that benefits local economies. In its September 10 parliamentary response, the Treasury explicitly acknowledged the value of positive investment supporting local economies and genuine small businesses.

The question is therefore likely to be how ministers define a genuine holiday business.

Would a retired couple running one cottage qualify?

What about a family using a second property for part of the year and renting it to tourists for the rest?

What happens to properties in seasonal destinations where demand is heavily concentrated into a few months?

And how would councils administer the new system?

Those details could determine whether a reform primarily targets second-home owners or ends up affecting a much wider section of the tourism industry.

October 28 will be the key date

For now, the Government has stopped short of confirming the proposed change.

The Treasury’s position is that the Chancellor will set out tax decisions at fiscal events, while the review of short-term-let taxation remains ongoing.

That means the October 28 Budget will be closely watched by holiday-let owners, tourism businesses and councils across England.

If ministers decide to change the treatment of self-catering properties, the details will matter just as much as the headline.

The Government could introduce new eligibility tests, alter the relationship between Council Tax and business rates, change relief arrangements or adopt another mechanism designed to distinguish genuine holiday businesses from second homes.

For families, meanwhile, the immediate issue is not a confirmed £3,000 holiday tax.

There is no announced nationwide charge requiring every family to pay £3,000 for a holiday.

The potential £1,000–£3,000 figure relates to the estimated additional annual cost for some holiday-let businesses if their tax treatment changes.

But if those costs are passed through to customers, the dispute could eventually be felt by holidaymakers through higher accommodation prices.

That is why the policy has attracted attention well before the Budget.

For Burnham and Healey, the challenge will be balancing the Government’s stated aim of improving tax fairness with its simultaneous promise to support small businesses, tourism and economic growth across Britain’s regions.

The final decision on October 28 will show whether ministers believe the current holiday-let system needs another major overhaul — and, if they act, exactly who will end up paying for it.