Your STL property might be on the wrong tax register. That costs money either way.
Most residential properties pay council tax. Most commercial properties pay business rates. Short-term lets sit awkwardly between the two, and getting the classification wrong means you are either overpaying, underpaying, or exposing yourself to a council challenge.
The rules differ by jurisdiction. This guide covers when the switch happens, what it means for your costs, and what you need to do.
England
In England, a property is assessed for business rates (rather than council tax) if it meets the following conditions:
- The property is available for short-term letting for 140 days or more per year
- The property is actually let for 70 days or more per year
Both conditions must be met. A property that is available for 200 days but only actually let for 50 days stays on council tax.
These thresholds were tightened in April 2023. Previously, only the availability test applied (with no minimum actual letting days), which allowed some owners to avoid council tax by claiming the property was "available" for STL while rarely actually letting it.
How to switch
If your property meets both tests, you can apply to the Valuation Office Agency (VOA) to have it assessed for business rates. The VOA will give it a rateable value and remove it from the council tax register.
Small Business Rates Relief
This is the big draw. In England, if your property's rateable value is below £12,000, you pay zero business rates thanks to Small Business Rates Relief (SBRR). Between £12,000 and £15,000, you get tapered relief.
Most individual STL properties (flats, cottages, small houses) have rateable values below £12,000. That means:
- No council tax
- No business rates
- Effectively zero local tax on the property
This is a significant saving. Council tax on a Band D property is roughly £2,000/year. Business rates with SBRR can be zero.
However: SBRR only applies to your first (or only) commercial property. If you have multiple STL properties all on business rates, SBRR only covers one. The others pay full business rates, which can be higher than council tax.
The catch
The government has signalled intent to close this loophole. The 2023 threshold tightening was the first step. Further changes may follow. Do not build a business model that depends on zero-rated business rates forever.
Also: if your property is on business rates and you stop meeting the letting threshold (you let it for fewer than 70 days in a year), the VOA can move it back to council tax. You may then owe back-dated council tax.
Scotland
Scotland's position changed significantly with the Non-Domestic Rates (Scotland) Act 2020 and subsequent regulations.
The test for business rates in Scotland:
- Property is available for short-term letting for 140 days or more per year
- Property is actually let for 70 days or more per year
Same thresholds as England (aligned from April 2022).
Scottish Small Business Bonus Scheme
Scotland has its own equivalent of SBRR: the Small Business Bonus Scheme (SBBS). Properties with a rateable value of £12,000 or below pay zero rates. Between £12,000 and £15,000, tapered relief applies.
The same economics apply as in England: an individual STL property below the threshold can pay nothing in local tax.
STL licence interaction
Your Scottish STL licence and your rates classification are separate but related. Having an STL licence does not automatically move your property to business rates, and being on business rates does not automatically give you an STL licence. But the council can use one as evidence when assessing the other.
If you tell the council your property is available for 200 days for STL licensing purposes but tell the assessor it is only available for 100 days to stay on council tax, that inconsistency will catch up with you.
Self-catering definition
In Scotland, a property classified as "self-catering" (the formal category for STL on the non-domestic rates roll) must meet the letting-days threshold. The Scottish Assessors Association maintains the roll.
Wales
Wales has taken a stricter approach than England or Scotland.
From April 2023, the Welsh thresholds are:
- Property is available for short-term letting for 252 days or more per year
- Property is actually let for 182 days or more per year
These are significantly higher than England and Scotland. A property that would qualify for business rates in England (available 140, let 70) would remain on council tax in Wales unless it is let for at least 182 days.
Why Wales is stricter
The Welsh Government explicitly stated the higher thresholds were designed to prevent second-home owners from avoiding council tax by claiming their property was a holiday let. Some Welsh councils were seeing large numbers of properties switching to business rates and claiming Small Business Rates Relief, reducing the local tax base.
Council tax premiums on second homes
Welsh councils can charge a council tax premium of up to 300% on second homes. A property that does not meet the 252/182 threshold stays on council tax and may face the premium.
This creates a squeeze: if your Welsh STL is not let frequently enough to reach the business rates threshold, you may pay up to four times the standard council tax.
Small Business Rates Relief in Wales
Wales has its own scheme. Properties with a rateable value up to £6,000 pay zero rates. Between £6,000 and £12,000, tapered relief applies. The thresholds are lower than England and Scotland.
Practical steps
1. Know your actual letting days
Track every night your property is actually occupied by a paying guest. Calendar records, booking confirmations, and platform reports are your evidence. The council or VOA can request proof.
2. Know your jurisdiction's thresholds
| Jurisdiction | Available (days/yr) | Actually let (days/yr) |
|---|---|---|
| England | 140+ | 70+ |
| Scotland | 140+ | 70+ |
| Wales | 252+ | 182+ |
3. Apply at the right time
If you are starting a new STL and expect to meet the thresholds in your first year, apply to the VOA (England) or Scottish Assessors (Scotland) early. You may be able to backdate the switch.
4. Keep records
If the council challenges your classification, you need to prove your letting days. Keep:
- Booking confirmations from all platforms
- Direct booking records
- Calendar exports showing occupied dates
- Bank statements showing rental income
5. Plan for the gap year
A new STL property may not meet the 70-day (or 182-day) actual letting threshold in its first year. You will pay council tax for that period. Budget for it.
6. Watch for policy changes
Governments are actively reviewing STL taxation. Council tax premiums, business rates thresholds, and relief schemes are all subject to change. Stay current.
The double-taxation trap
Be careful not to end up paying both council tax and business rates in the same period. When you switch registers, make sure the effective dates align and that you are removed from one roll when you are added to the other. Contact your council and the VOA/assessor to confirm.
If you receive a council tax bill and a business rates bill for the same property covering the same period, challenge it immediately.
How SelfLet Stays helps
SelfLet Stays tracks your booking nights across all channels, giving you an accurate count of actual letting days per property. The compliance dashboard flags your council tax/business rates assessment status as a compliance item. When you need to prove your letting days to the VOA or your council, export the data directly from your booking records.