Could changes to holiday let tax boost rental supply?

With the government reportedly considering higher taxes on holiday lets, could some owners move their properties to the long-term rental market?

The government is reportedly planning to treat holiday lets as second homes rather than businesses. This would stop owners from claiming small business rates relief, potentially costing them several thousand pounds a year in tax.

Alistair Handyside, chairman of the Professional Association of Self-Caterers, warned that this could push many holiday let providers out of the market. He said annual profits can be as low as £5,000, and losing tax relief would take a big bite out of that.

But selling won’t be their only option.

If owners could instead move their properties into the long-term rental market, that could bring much-needed additional stock in areas where short-term accommodation has taken properties out of the private rented sector.

The government’s tax plans aren’t confirmed yet. Treasury minister James Murray has confirmed that the government is reviewing the tax treatment of short-term lets. But any specifics will have to wait until the Budget on 28 October.

For agents, the impact could be worth watching. If higher costs persuade holiday let owners to switch to long-term tenancies, it could give rental supply a much-needed boost.