200% Council Tax for Isle of Wight Second Homes - Will It Affect Me?

A nice photograph of Freshwater Bay to jazz up a dull blog about tax

Before we get onto the main point of this blog, I would like to say that the comments pages on local news websites need to go into Room 101.

In the majority of cases, you will see these responses:

• Someone who hasn't read the article, but has read the headline and decides this warrants an idiotic kneejerk response. This makes so sense, since most headlines are cryptic clickbait that don't really tell you the main point of the story. For example, a headline tells you that a ferry has been cancelled. The kneejerk reactor says "That's ridiculous, why has it been cancelled?". Someone replies to say "have you read the article?" and then they respond to say that they didn't want to look at all the adverts. Someone else replies to say "It's cos of fog innit mate".
• A man who furiously blames the government, the council, criminals, migrants, unemployed people or people who have dared to moved house. This receives 27 thumbs up and a response saying "Well said!"
• Someone demanding a fixed link to the mainland, even if it's a story about a teddy bear's picnic at a pre-school. 97 people respond to either offer their support or say that "you shouldn't have moved to an Island if you wanted a tunnel". Armchairs engineers leap in with suggestions about where the tunnel should start and stop, presumably in the hope that this will form the start of a feasibility study. A concerned old lady voices concern about the red squirrels/criminals/residents of Portsmouth that might get to the Island.
• A man called Alan who always finds something to complain about, regardless of what the story is. 
• A quiet voice who has understood the story and then gives a nuanced and sympathetic response having considered the pros and cons of the argument. This person receives one thumbs up from a close friend.​

What's this got to do with doubling council tax on second homes on the ISle of Wight?

I saw a similar flurry of comments on a recent story about council tax on second homes. The comments showed a staggering amount of misinformation, which made a Trump press conference look like a Royal Institution Christmas Lecture. The article seemed to suggest that the change was to stop people making money from holiday lets. My understanding is that it isn't about that at all, as I'll attempt to explain.

What are the new rules?

We've written before about second home ownership on the Isle of Wight but I thought it was worth explaining what this new change is about - from my understanding. Please politely comment below if I've misunderstood. Don't treat this as financial advice or cast-iron evidence that you can wave in front of someone at the reception desk of the Isle of Wight Council.

1. If you own one house on the Isle of Wight and you live in it then this won't make any difference to you. You probably knew that already.
2. It also won't make any difference to people who rent out a property on a long term basis to a tenant. It gets more complicated if the property is empty for a long time but that usually only happens if your property is falling down, as there's high demand for good quality long term rental properties.
3. If you rent out a holiday let on the Isle of Wight then this probably won't make any difference to you.
4. If you have a second home on the Isle of Wight then your council tax will probably double, unless you qualify for an exemption.

The main confusion and misinformation in the article I read concerned the third one. Various commenters were concerned that the added costs would be passed on to holidaymakers or that it would lead to a shortage of long term rental properties.

I don't think either of those things will happen.

More likely, it will suppress property prices as there will be an increase in people selling their second homes (this has happened in Wales). 

For holiday let owners, the usual setup is that you apply for an exemption from Council Tax, but instead are required to pay Business Rates. If you just own one holiday let and it is a small property then your business rate may well be zero (that's the case with our holiday let). In other words, you won't pay Business Rates and you won't pay Council Tax either.

To qualify for this golden tax-free experience, it needs to be a genuine holiday let.

That means that it needs to fulfil the occupancy rules. You can find these on the Isle of Wight Council website. The gist of it is that you can use the property for yourself or friends occasionally but for the majority of the time it is available to genuine paying guests. And no, you can't get away with charging your mate Dave a tenner to stay for a week and count that as a paying guest. It has to be people paying the market rate.

The doubling of council tax on the Isle of Wight - as far as I can tell - is mostly targeted at someone who owns a house on the mainland that is their main residence, but who also owns a nice little bolthole in a lovely seaside town. They pop across at weekends during the summer and friends occasionally use it. The property is not rented out to the public. 

Whether taxing these people more is justified or not is a matter for the comments section. Alan, I look forward to hearing your unrelated complaints about Sandown.

Life is complicated, so some will end up paying more as an unintended consequence of the tax increase. For example, if you rent out a property to holidaymakers but don't make the required occupancy levels then your property would be classed as a second home and be liable for double council tax. 

Anyway, must dash, I've got to waste another hour responding to comments on a local news website.