Written Statement: Consultation on the classification of self-catering properties for local tax purposes in Wales

Today, I am launching a consultation about changes to the letting criteria used to classify self-catering properties for local tax purposes.

Self-catering properties are classified as domestic and liable for council tax, unless they meet certain criteria related to their commercial letting activity. If a property meets these criteria, it is subject to non-domestic rates. 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.

Our manifesto included 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 statement and consultation provide an update on our approach to delivering this commitment and set out specific proposals for exemptions, to reach a permanent and sustainable solution to this issue.

Tourism is an important part of the economy in Wales, but it can impact the housing market for local people. We want to find the right balance between the economic contribution made by self-catering holiday lets and the ability of local authorities to respond to any issues arising from over-supply in some areas. 

Over the decade between 2013 and 2023, the number of self-catering properties subject to non-domestic rates almost trebled, from around 4,000 to over 11,000. This caused concerns that an over-supply, particularly in some areas, was limiting the economic contribution made by some properties and the housing stock available for local communities. Following implementation of the 182-day threshold and further increases in letting activity by some operators, around 8,000 self-catering properties are now listed for non-domestic rates. This is around 70% of the peak in 2023.

While the aims of the letting threshold are generally accepted, there has been a sustained debate about the level and impact on genuine self-catering businesses. The Welsh Government recognises 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. We are, therefore, reviewing the 182-day threshold.

It should also be recognised that some of the properties which have not met the 182-day threshold were only being let for little more than 10 weeks (70 days) per year. This is unlikely to represent the optimal contribution that these properties could make to their local communities. Owners have the option to continue providing self-catering accommodation for part of the year, accepting that their contribution will be made through council tax. 

There is a careful balance to strike in reviewing the 182-day threshold and no potential alternative would satisfy all stakeholders. The Welsh Government may wish to consider a modest reduction to the letting threshold, taking account of the findings of our review. It may be that any reduction of more than four weeks per year, for example, could risk substantially undermining the aim of the letting threshold.

We will review the available evidence and engage further with stakeholders, including self-catering sector representatives and local authorities. The consultation will contribute to the review by seeking views on the impacts that a reduction in the letting threshold may have. We will complete the review by the end of the year.

The Welsh Government also recognises that some self-catering properties could not be used as permanent homes. We are, therefore, proposing five exemptions for the following circumstances:

1. Properties which are part of a wider business
2. Large multi-unit properties
3. Properties subject to a relevant planning restriction
4. Properties within the curtilage of the owner's home
5. Properties on the owner's farm

It is important that the exemptions can be consistently applied, while minimising any risk of unintended consequences. The consultation sets out the proposals in detail and asks for views. 

The consultation will run for 12 weeks from 31 July to 23 October 2026. 

Subject to the outcome of the consultation and review of the 182-day threshold, legislation would be required to implement any changes. This would be intended to take effect on 1 April 2027.

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.