Dorset Council Tax and Business Rates for Holiday Lets

Owning a holiday let in the Lyme Bay area, including Lyme Regis, Charmouth, Seaton, Beer and surrounding parts of Devon and Dorset can be a rewarding investment. However, understanding whether your property should be charged council tax or business rates is essential for compliance, profitability, and long-term planning.

This Lyme Bay Holidays guide explains the differences between council tax and business rates, outlines current eligibility rules for holiday lets in England, and highlights local considerations relevant to the Dorset area.

What is the difference between Council Tax and Business Rates?

Council Tax

Council tax applies to domestic properties used as homes. If a holiday let does not meet the criteria to be treated as a business, it will usually remain subject to council tax. Council tax bands are set by the Valuation Office Agency (VOA) and vary depending on property value.

Business Rates

Business rates apply to non-domestic properties, including qualifying self-catering holiday lets. For many holiday let owners, business rates can be significantly lower than council tax, particularly when Small Business Rate Relief is available.

When does a Holiday Let qualify for Business Rates?

Since April 2023, a self-catering property in England must meet all of the following criteria to be assessed for business rates:

– Available for commercial letting for at least 140 nights in the last 12 months
– Actually let for at least 70 nights in the last 12 months
– Intended to be available for at least 140 nights in the next 12 months

If these conditions are not met, the property will normally be reverted to council tax.

Business Rates and Relief

The Valuation Office Agency assigns a rateable value to each qualifying holiday let. This is based on the property’s estimated annual rental income.

Small Business Rate Relief may apply:
– Rateable value under £12,000: usually 100% relief
– Rateable value between £12,001 and £15,000: partial relief

Owners with multiple properties may not qualify for full relief.

Council Tax and Second Home Premiums

Holiday lets that do not qualify for business rates are charged council tax. Many councils in Devon and Dorset now apply second home premiums, which can increase council tax bills by up to 100%.

Local authorities such as Dorset Council and East Devon District Council have introduced these measures to address housing pressures in coastal communities.

Local recommendations for Lyme Bay

The Lyme Bay area forms part of the Jurassic Coast World Heritage Site and attracts year-round tourism. While holiday lets support the local economy, councils have increased scrutiny of short-term rentals.

Owners may be required to provide booking calendars, invoices, or listing details to confirm business rate eligibility.

Frequently Asked Questions

Can I switch from council tax to business rates mid-year?
Yes, if your property meets the eligibility criteria. You must apply through the Valuation Office Agency and notify your local council.

What happens if my bookings drop?
If you fail to meet the letting thresholds, your property may be reclassified back to council tax.

Do long-term lets count?
Stays over 28 nights usually do not count as short-term lets for business rate purposes.

Do business rates include waste collection?
No. Commercial waste collection is usually charged separately.

Contact Lyme Bay Holidays

Understanding whether your holiday let should be charged council tax or business rates is essential, particularly in high-demand areas such as Lyme Bay. Keeping accurate booking records and staying informed about local council policies can help avoid unexpected costs.

For further information about other areas of the UK and tax information, read more from our parent company Sykes Cottages here.

If you’re thinking of holiday letting your property or buying locally in the area, Lyme Bay Holidays are experts in guiding you on your holiday letting journey.

Download your free owner pack here.

Note: This blog post is for informational purposes only and does not constitute financial advice. Always consult with a professional for your specific circumstances. 

* The information above is shared with you by Zeal. Lyme Bay Holidays and its parent company Sykes Cottages can’t advise you on, and isn’t responsible for, tax matters in relation to your holiday let and the above should not be taken as such, rather as a prompt of the issues involved for further consideration. As always, please read the relevant laws, regulations and guidance and seek advice from external experts where you require it. Lyme Bay Holidays and Sykes Cottages hope that by pointing you in the direction of an expert in the field, it’s starting you off on the right foot, and you can read into this matter further and seek your own advice from Zeal, or your chosen advisor, as and when you feel it’s needed. We cannot make any representations or warranties of any kind as to the competency, qualification, fitness for purpose, accuracy, reliability, suitability, or availability of Zeal’s offers, products or services. If you choose to enter into any arrangement for the supply of goods or services with Zeal, you do so entirely at your own risk. Any such arrangement is between you and them. We are not a party to it. We shall not be liable for any loss or damage arising under or in connection with any such arrangement or any action or decisions you take or do not take as a result of reading the above or any loss suffered as a result. 

MATT JEFFERY, TAX PARTNER, ZEAL TAX  

There are lots of tax advantages of holiday letting and some pitfalls too! Paying the right amount of tax will ensure you get the maximise possible return on your investment.    If any owners have any tax questions or advice on business rates , you can ask one of our experts using the free Sykes owner’s helpline sykes@gozeal.co.uk or call us on 01633 499771