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; and
• the short periods it has actually been commercially let for amounted to at least 182 days during that period (an average may be taken across two or three years and across multiple units).

The letting thresholds were increased in response to concerns about growing numbers of self-catering properties and the ease with which owners of second homes could escape council tax liability. Over the decade between 2013 and 2023, numbers listed for non-domestic rates almost trebled, from around 4,000 to over 11,000. There were concerns that an over-supply of self-catering properties, particularly in some areas, was limiting their economic contribution and the housing stock available for local communities.

Following implementation of the increased letting thresholds and some adjustment, around 8,000 self-catering properties are now listed for non-domestic rates, which is 70% of the peak in 2023. This does not reflect any additional benefit to operators from the refinements implemented on 1 April 2026. These refinements enable operators to rely on an average of days let over the previous two or three years and count up to 14 days per year of donations of short breaks to charity.

The Welsh Government has made a commitment to keep the 182-day letting threshold under review and create clear and reasonable new exemptions where self-catering accommodation would not qualify as a private home. This consultation seeks views on these matters. 

While the aims of the increased letting threshold are generally accepted, there has been a sustained debate about the level of increase and impact on genuine self-catering businesses. It is recognised that 182 days letting has not been achieved for some established self-catering properties which are let for almost half the year and make a significant contribution to their local economies. The Welsh Government is, therefore, reviewing the 182-day threshold.

It must also be recognised that some of the properties which have not met the increased threshold were being let for little more than 10 weeks (70 days) per year, potentially by speculative operators rather than genuine businesses seeking to maximise their lettings. In many cases, these properties may be better used as permanent homes for members of the local community. Owners have the option to use them as self-catering properties for part of the year, accepting that their contribution to the local community will be made or supplemented through council tax. 

As a result of these competing considerations, there is a careful balance to strike in reviewing the 182-day threshold and no potential alternative would satisfy all stakeholders. In the context of the long-term trend in self-catering property numbers, there will be a limit to the extent of reduction the Welsh Government may wish to consider. A reduction of more than four weeks per year (resulting in a letting threshold of 154 days), for example, could risk substantially undermining the aim. It is recognised that some operators have argued for a much lower threshold, but this could incentivise an over-supply of self-catering properties and not strike the optimal balance.

The Welsh Government will consider the range of evidence which has accrued on this matter over recent years and engage further with stakeholders, including self-catering sector representatives and local authorities. This consultation will contribute to the review by seeking views on the impacts that a reduction in the letting threshold may have on self-catering operators and the ability of local authorities to respond to the issues arising from any over-supply. The review will be completed by the end of the year, so that any change which is adopted as a result can be implemented as an early priority

The Welsh Government recognises that some self-catering properties could not be used as permanent homes. Five types of exemption from the application of the historic letting criteria are proposed, in respect of the following circumstances:

1. Property which is part of a wider business;
2. Large multi-unit property;
3. Property subject to a relevant planning restriction;
4. Property within the curtilage of the owner’s home; and
5. Property on the owner’s farm.

The first two proposals would replicate exemptions recently adopted in England. The remaining three relate to other circumstances which (in many or all cases) mean the property could not be used as a permanent home. 

It is important that the proposed exemptions can be consistently evidenced by operators and applied by the HMRC Valuation Office, while minimising any risk of unintended consequences. An explanation of each proposal is set out below.

Properties in these circumstances would only be exempt from domestic classification where they continue to be used to provide self-catering accommodation. Exemptions are not intended to apply to properties which are vacant or periodically occupied only as second homes. The Valuation Office will continue to seek evidence that a property will be available to let as self-catering accommodation for short periods totalling at least 252 days in the year ahead.

1. Property which is part of a wider business

This exemption would apply to self-catering units which are an integral part of another type of businesses being conducted at the same non-domestic property. Examples include accommodation for guests of a leisure park or wedding venue. The same exemption has recently been adopted in England.

Circumstances in which there is no functional connection between the self-catering unit and the other business (e.g. a flat above a shop) would not be covered by this exemption. In such circumstances, the accommodation is not specifically for customers of the other businesses (e.g. the shop, which is a separate activity). Proximity to the other business would not prevent the property from being sold or let separately as a permanent home.

2. Large multi-unit property

This exemption would apply to properties, known as aparthotels or serviced accommodation, which are hotel-style apartment blocks containing multiple self-catering units which are subject to a single combined assessment for non-domestic rates purposes. As each apartment is part of a larger property used for the same business purpose, it is proposed that the exemption would apply to properties comprised of five or more self-catering units. The same exemption has recently been adopted in England.

Some other types of large multi-unit property may also be covered by this exemption, in circumstances where the units would be treated as a single assessment for non-domestic rates purposes. It would not apply to multiple properties which are part of the same businesses, but assessed for non-domestic rates separately.

3. Property subject to a relevant planning restriction

This exemption would apply to properties which are subject to a planning restriction which prevent continuous occupancy as a permanent home or specifies use for holiday letting only. The proposed definition would replicate an existing exception from a council tax premium.

It is recognised that relevant planning restrictions apply to some, but not all, self-catering properties at the owner’s home or farm. For this reason, the two further exemptions described below are also being considered.

4. Property within the curtilage of the owner’s home

This exemption would apply to self-catering units on land which also includes the primary residence of the owner under the same register title deed. Examples may include attached annexes, converted outbuildings, lodges and any other separate dwelling within the grounds.

It is recognised that some properties in similar circumstances may be on land near the owner’s home under a separate register title. Sale or long-term let as a permanent home are likely to be a more viable options for such properties. An exemption which attempted to cover this scenario would apply more widely than intended (e.g. to the house next door to an operator’s home, if purchased as an investment and let as self-catering accommodation).

5. Property on the owner’s farm

This exemption would apply to self-catering units which are operated by the owner or occupier of adjoining agricultural land or buildings (which are exempt from non-domestic rates). Examples may include converted outbuildings and other separate dwellings on farmland, which are typically part of farm diversifications.

It is recognised that some properties in these circumstances may be suitable for sale or long-term let as a permanent home. This would be a subjective judgement in individual cases, rather than a matter of fact which could be clearly reflected in the definition of the exemption.

The Welsh Government will consider the views submitted in response to this consultation and the findings of the review of the 182-day threshold. Subject to the resulting decisions, the legislation required to enact the changes would be intended to take effect on 1 April 2027.

Question 1 

Do you think the Welsh Government should consider a modest reduction to the letting threshold?

Yes

No

Please give reasons for your view:

Question 2 

What impacts do you think a modest reduction to the letting threshold would have on self-catering operators?

Question 3

What impacts do you think a modest reduction to the letting threshold would have on the ability of local authorities to respond to the issues arising from any over-supply of self-catering properties?

Question 4

Do you agree with the proposed exemption for properties which are part of a wider business?

Yes

No

Please give reasons for your view:

Question 5

Do you agree with the proposed exemption for large multi-unit properties?

Yes

No

Please give reasons for your view:

Question 6

Do you agree with the proposed exemption for properties subject to a relevant planning restriction?

Yes

No

Please give reasons for your view:

Question 7

Do you agree with the proposed exemption for properties within the curtilage of the owner’s home?

Yes

No

Please give reasons for your view:

Question 8

Do you agree with the proposed exemption for properties on the owner’s farm?

Yes

No

Please give reasons for your view:

Question 9

Are you aware of any other circumstances in which a property could not be used as a permanent home which should be considered for exemptions?

Yes

No

If yes, please give further details:

Question 10

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 11

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 12

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 23 October 2026, 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 and Legislation Branch
Welsh Government
Cathays Park
Cardiff
CF10 3NQ

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For further details about the information the Welsh Government holds and its use, or if you want to exercise your rights under the UK GDPR, please contact:

Data Protection Officer

Data Protection Officer
Welsh Government
Cathays Park
CARDIFF
CF10 3NQ

Email: Data.ProtectionOfficer@gov.wales 

Information Commissioner’s Office

Information Commissioner’s Office
Wycliffe House
Water Lane
Wilmslow
Cheshire
SK9 5AF

Telephone: 01625 545 745 or 0303 123 1113

Website: ico.org.uk

UK General Data Protection Regulation (GDPR)

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In order to show that the consultation was carried out properly, the Welsh Government intends to publish a summary of the responses to this document. We may also publish responses in full. Normally, the name and address (or part of the address) of the person or organisation who sent the response are published with the response. If you do not want your name or address published, please tell us this in writing when you send your response. We will then redact them before publishing.

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WG Number: WG54979

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