Mark Drakeford MS, Cabinet Secretary for Finance and Welsh Language
Today, I am launching a consultation about the Welsh Government’s proposals to refine the way in which the criteria used to classify self-catering properties for local tax purposes are applied.
Properties that are let out as self-catering accommodation are classified as domestic and liable for council tax, unless they meet certain criteria for non-domestic classification, related to their commercial letting activity. Since 1 April 2023, those criteria have included requirements that the property was available to let for at least 252 days and actually let for at least 182 days over the previous year.
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 three-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.
I can confirm that, following implementation, 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. 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.
All self-catering properties now classified as non-domestic have met the new letting criteria. It is, therefore, timely to consider whether any refinements to their treatment for local tax purposes should be adopted, to support stability. The Welsh Government is proposing to make two specific changes to the way the letting criteria are applied in assessments for non-domestic classification.
Firstly, we are proposing 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 previous year. This would provide an opportunity for operators whose compliance lapses by a narrow margin to potentially achieve 182 days letting again, before they would otherwise become liable for council tax.
Secondly, we are proposing to enable an allowance of up to 14 days per year for donations to charity of short breaks to count towards the letting criteria. This would be intended to ensure any such donations are not disincentivised and support the wider public benefit they provide.
Subject to the outcome of the consultation, legislation would be required to implement these proposals. Any legislative changes would be intended to take effect on 1 April 2026.
Where self-catering properties do not meet the letting criteria they are liable for council tax, which may include a premium. The powers to charge council tax premiums are flexible, enabling local authorities to develop tailored policies. For example, one local authority has created a local exception from the council tax premium, allowing self-catering properties a 12-month grace period paying only the standard rate of council tax following a move from non-domestic to domestic classification. The consultation also seeks views on the Welsh Government’s intention to encourage other local authorities to consider similar policies which would support self-catering operators with a stepped transition to council tax.
The Welsh Government’s proposals respond, in the manner considered appropriate, to matters raised by the self-catering sector during implementation of the new letting criteria. The consultation sets out the proposals in detail and asks for views. It will run for 12 weeks from 28 August to 20 November 2025.
The consultation is available at: Proposed refinements to the classification of self-catering properties for local tax purposes | GOV.WALES
This statement is being issued during recess to keep Members informed. Should Members wish me to make a further statement or to answer questions on this when the Senedd returns I would be happy to do so.