Is it Possible to Register a Buy to Let in England as a Business to Avoid Increased Council Tax on Second Homes?

In recent years, the property market in the UK has experienced significant changes, particularly concerning buy-to-let (BTL) properties and the associated council tax implications. As property investors navigate an evolving landscape, many are left wondering if they can register their buy-to-let properties as a business in England to mitigate the impact of increased council tax on second homes. This blog (Is it Possible to Register a Buy to Let in England as a Business to Avoid Increased Council Tax on Second Homes?) will delve into this question, highlighting the current regulations in England, and contrasting them with those in Wales and Scotland, where measures to close this loophole have been enacted.

Understanding Buy-to-Let Properties

A buy-to-let property is one purchased specifically to rent out to tenants, generating rental income for the owner. Investors have often turned to BTL as a means of generating passive income and taking advantage of property value appreciation. However, the advent of higher council taxes on second homes has raised questions about the financial viability of owning rental properties.

Council Tax Implications for Second Homes

In England, second homes—properties that are not the owner’s primary residence—are subject to higher council tax rates. Local authorities have the discretion to double the council tax on second homes, especially in areas where there’s a high demand for housing and the government aims to incentivise long-term rentals rather than short-term holiday lets. This creates a significant financial burden for landlords who own multiple properties.

Registering a Buy-to-Let as a Business in England

Landlords in England may consider registering their buy-to-let operations as a business to potentially reduce their council tax liabilities. To register as a business, one must adhere to specific criteria:

1. Business Registration: Landlords need to formally register their property rental business with HM Revenue and Customs (HMRC) and obtain the appropriate licenses.

2. Accounting for Rental Income: When registered as a business, landlords may be able to deduct legitimate business expenses from their taxable income, which can help manage overall tax liabilities.

3. Use of Limited Companies: Some landlords opt to establish a limited company to own their rental properties. This structure allows for potentially lower tax rates and different implications for capital gains tax. Additionally, limited companies may have more favourable treatment regarding council tax regulations.

That said, registering as a business does not automatically exempt landlords from higher council tax rates. It may provide some administrative and financial flexibility, but local councils have the authority to interpret business registrations differently, so it’s crucial to consult with tax professionals.

Comparisons with Wales

In stark contrast to the situation in England, Wales have taken definitive steps to close loopholes exploiting the difference between residential and business rates on second homes.

The Welsh government has implemented a new system where local authorities can charge an increased council tax rate on second homes, aiming to discourage speculation and prioritise local housing needs. Since April 2023, local authorities can charge up to 300% of the standard council tax rate for long-term empty properties. Furthermore, new regulations stipulate that as of 2023, to qualify for business rates and associated relief, landlords must prove that the property is genuinely available for rent and not merely held as a second home for personal use.

Implications and Considerations for Landlords

While the prospects of registering a buy-to-let property as a business in England may appeal to some landlords, there are essential considerations to keep in mind:

1. Financial Planning: Engaging with a financial advisor is critical for landlords to understand the full scope of liabilities, potential savings and legislative changes to effectively manage their property portfolio.

2. Legal Responsibilities: Registering as a business may increase the complexity of legal obligations, including property regulations, tenant rights and tax responsibilities. Landlords must be diligent in maintaining compliance.

3. Market Dynamics: Property investors should stay informed about local councils’ policies, as these can shift significantly based on demand, housing crises, and political decisions. We do not consider that it will be long before the current loophole, already closed in Wales will be well and truly slammed shut in England.

Conclusion

In conclusion, while it is indeed possible for landlords to register their buy-to-let properties as a business in England, doing so does not guarantee a reduction in council tax liabilities on second homes. The landscape in England differs sharply from that of Wales, where government interventions have effectively closed loopholes that once allowed landlords to mitigate council tax burdens. As the regulatory environment evolves, landlords must stay vigilant and consider expert advice especially tax advice from a specialist accountant to navigate the complexities of property ownership, taxation and the pressing need for affordable housing.

This blog is provided for illustrative purposes only and of interest to the general reader but we do not provide specific advice on any financial matter or tax issue. For that we strongly advise that you speak to an accountant specialising in the field.

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This blog was prepared by Alexander JLO’s senior partner, Peter Johnson on 23rd April 2025 and is correct at the time of publication. With decades of experience in almost all areas of law Peter is happy to assist with any legal issue that you have. He is widely regarded as one of London’s leading lawyers. His profile on the independent Review Solicitor website can be found Here