Consultation on the proposed refinements to the classification of self-catering properties for local tax purposes

For local tax purposes, properties are either classified as domestic (and liable for Council Tax) or non-domestic (and liable for non-domestic rates). For most types of property, the distinction between domestic and non-domestic use is clear. A specific definition is required to classify self-catering accommodation for local tax purposes, as the same properties could potentially be used either for this purpose or as domestic dwellings. Such properties are classified as domestic, unless they meet certain criteria related to their commercial letting activity.

Since 1 April 2023, a self-catering property has been classified as non-domestic if:

• it will be available for letting commercially as self-catering accommodation for short periods totalling 252 days or more in the following 12 month period
• the ratepayer’s interest in the property enables them to let it for such periods
• in the 12 months prior to the day being considered it has been available for letting commercially as self-catering accommodation for short periods totalling 252 days or more
• the short periods it has actually been commercially let for amounted to at least 182 days during that period

The primary aim of this policy change was to ensure property owners are making a fair contribution and to maximise the use of property, to the benefit of local communities. This could include benefits arising from increased occupancy for short-term letting or the release of some properties for sale or rent as permanent homes for local people. Local taxation changes form part of the Welsh Government’s 3-pronged approach to tackling the impact that large numbers of second homes and self-catering properties can have on communities and the Welsh language in some parts of Wales.

Following full implementation of the changes, 60% of self-catering properties have met the new letting criteria. This exceeds the levels predicted by the self-catering sector and historical occupancy estimates available when the changes were introduced. The number of self-catering properties now in the rating list is similar to the number listed in 2019, prior to the substantial increase during the early 2020s. Numbers increased by 60%, from 7,000 to over 11,000, between April 2019 and April 2023. This followed an almost doubling between 2013 and 2019, which had led to concerns about an over-supply and the ease with which owners of second homes could escape Council Tax liability.

Many properties in all parts of Wales have met the new letting criteria, demonstrating that this is achievable where supply does not exceed demand. The increased lettings achieved by many operators will support the benefits to local communities intended by the policy change. The Welsh Government remains of the view that, for a property to be classified as non-domestic for local tax purposes, it should operate as a business for the majority of the year.

Now that the outcome of the changes to the letting criteria is known, it is timely to consider whether any refinements to the relevant local tax policies should be adopted. The Welsh Government has developed 2 specific proposals to refine the way the letting criteria are applied, and is also seeking views on the merits of a stepped transition to Council Tax rules for properties reclassified as domestic. These proposals respond, in the manner considered appropriate, to matters raised by the self-catering sector during implementation of the new letting criteria.

All self-catering properties now classified as non-domestic have met the new letting criteria. Currently, the requirement to be let for at least 182 days must be met every year for a property to avoid reclassification as domestic. It is recognised that a self-catering property may comfortably exceed 182 days letting in most years, but occasionally fall short by a narrow margin (e.g. due to a temporary drop in demand or late cancellation).

In this scenario, the property would be liable for Council Tax for the period when compliance had lapsed. It would then be re-listed for non-domestic rates if the criteria were met again from a future date. This has the potential to result in frequent changes of classification for the same property over time, where the intended levels of occupancy are generally achieved (i.e. on average). That outcome would, in turn, result in financial uncertainty for the operator and local authorities.

The Welsh Government proposes to enable an average of days let over multiple years to be taken as evidence of compliance, where 182 days are not achieved in the year prior to the date of assessment. This would, in effect, provide a form of ‘grace period’ for 182 days letting to be achieved again, before the property would otherwise become liable for Council Tax.

It is considered necessary to limit the period over which an average of days let could be taken, to a maximum of 3 years prior to the day the assessment relates to. This would support operational deliverability and ensure that properties which do not resume compliance are not able to rely on their historic occupancy for an extended period. As averages taken over 2 or 3 years may produce different outcomes, it is proposed that averages taken over either of these timeframes could evidence compliance, on a case-by-case basis.

Under the existing criteria, a business with multiple units of self-catering property may use an average of their days let across all properties to evidence overall compliance with the 182-day letting requirement, for any given year. The proposed approach would also apply to multi-unit businesses, whereby an average could be taken across multiple properties and years.

This proposal would support self-catering businesses generally operating at a level which aligns with the policy intent for the increased letting criteria and help to ensure stability in the domestic and non-domestic tax-bases. In recognising the potential for more challenging years to temporarily compromise occupancy levels, it is intended to respond directly to a policy change requested by the self-catering sector.

The criteria used to classify self-catering properties relate specifically to commercial letting activity. This does not prevent operators from providing charitable donations of short breaks, but sector representatives have reported that some operators are reluctant to do so, in case it jeopardises their ability to meet the letting criteria. It is not known how widespread such donations are in practice.

The Welsh Government proposes to enable an allowance of up to 14 days per year for charitable donations to count towards the letting criteria. The intention is to avoid disincentivising such donations, which would support a broader public benefit for disadvantaged people, rather than to make them a specific requirement. To avoid any change to the treatment of previous activity of this type, this proposal would be intended to apply to eligible donations made from 1 April 2026 onwards.

It is important to ensure that this allowance is not open to exploitation by, for example, operators making direct donations of stays to friends, family or acquaintances which would not be eligible for a charitable benefit. To ensure the legitimacy of any charitable donations, supported by appropriate evidence, it is proposed that they must be made through a registered charity to be counted. There are registered charities which facilitate donations of short breaks in holiday accommodation to disadvantaged or otherwise deserving people.

This proposal would support a wider public benefit arising from charitable donations of short breaks, where they occur. It is intended to respond directly to a concern raised by representatives of the self-catering sector.

All self-catering properties which do not meet the criteria to be classified as non-domestic are classified as domestic by default, thereby incurring Council Tax liability. Where a local authority has determined to apply a Council Tax premium on second homes, owners may be charged an additional amount unless their property qualifies for an exception, or the authority has chosen not to apply the premium in relevant circumstances. In some cases, this can represent a significant and immediate increase in local tax liability. However, the powers to charge Council Tax premiums are flexible and allow local authorities to determine which properties they will or will not apply a premium to, enabling them to develop tailored policies and transitions for taxpayer groups.

The Welsh Government highlights Monmouthshire County Council’s decision in 2024 to create a local exception from the Council Tax premium, allowing self-catering properties a 12-month grace period paying the standard rate of Council Tax following a move from non-domestic to domestic classification. This transitional measure is particularly beneficial for properties that narrowly miss compliance with the 182-day letting threshold, offering operators time to adapt and plan accordingly.

The Welsh Government believes supporting self-catering operators through a stepped transition, by charging Council Tax at the standard rate for 12 months before any premium applies, is an example of good practice. We want to encourage other local authorities to consider adopting a similar approach locally. There are no legislative barriers preventing authorities from developing local policies on Council Tax premiums in this way. This consultation seeks views on the merits and drawbacks of a stepped transition from non-domestic rates to Council Tax (where a premium would otherwise apply) for self-catering operators. We will also undertake a series of discussions on this and any other ideas with local government through established networks such as the Partnership Council for Wales.

Subject to consideration of the views submitted in response to this consultation, the Welsh Government intends to bring forward the legislation required to make the proposed refinements to the application of the letting criteria and bring them into force on 1 April 2026.

Question 1 

Do you support the proposal to enable days let to be averaged over multiple years?

Question 2 

Do you support the proposal for an allowance of charitable donations to count towards the letting criteria?

Question 3

Does the proposal to require donations to be made through a registered charity achieve the policy intent?

Question 4

Do you agree with the Welsh Government's intention to encourage local authorities to support self-catering operators whose properties have moved from non-domestic rates to Council Tax, by charging the standard rate of Council Tax for 12 months before any premium may apply?

Question 5

What, in your opinion, would be the likely effects of the proposals on the Welsh language? We are particularly interested in any likely effects on opportunities to use the Welsh language and on not treating the Welsh language less favourably than English. 

1. Do you think that there are opportunities to promote any positive effects?
2. Do you think that there are opportunities to mitigate any adverse effects? 

Question 6

In your opinion, could the proposals be formulated or changed so as to:

1. have positive effects or more positive effects on using the Welsh language and on not treating the Welsh language less favourably than English; or
2. mitigate any negative effects on using the Welsh language and on not treating the Welsh language less favourably than English?

Question 7

We have asked a number of specific questions. If you have any related points which we have not specifically addressed, please use this space to record them.

Submit your comments by 20 November 2025, in any of the following ways.

• Complete our online form
• Download, complete our response form and email CTandNDR.Consultations@gov.wales
• Download, complete our response form and post it to:

Non-Domestic Rates Policy Branch
Welsh Government
Cathays Park
Cardiff
CF10 3NQ

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Number: WG52866

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