A major policy shift aimed at tackling housing shortages and boosting council revenues is already shaping the behaviour of second homeowners.
Since April 1 this year, councils in England have had the power to charge owners of second homes a 100% council-tax premium. The measure, introduced by the previous Conservative government, was billed as a way to free up homes for local residents priced out of their communities, while also raising money for local authority coffers. It follows the example of Welsh councils, which have been able to charge a council-tax premium on second homes since 2017, and Scottish ones, granted similar powers last year.
But while the surcharge was expected to raise significant funds, our research suggests it is already reshaping behaviour among second homeowners—many of whom are choosing to sell rather than pay the additional tax.
Hamptons submitted a Freedom of Information request to the 30 English councils with the highest share of second homes and received responses from 28 of them. Our findings show a marked drop in the number of properties liable for the new charge.
In the year leading up to the introduction of the 100% premium being applied, the number of second homes paying council tax in these areas fell by more than 11,700 – from 110,254 to 98,460, a decline of 10.7%. This reduction represents a potential loss of around £55m in additional revenue.
But not all second homes are liable to pay additional council tax. Around 13% are exempt, and the reasons behind these exemptions offer further insight into how owners are responding. The most common exemption – given in 34% of cases – is that the owners had put the property up for sale. This exemption, valid for 12 months, would save the owners a collective £17.2m in council tax.
The second most common reason (accounting for 31% of properties) was that year-round occupation was not permitted due to planning restrictions, while the third (12%) was that the homes were undergoing the probate process. Homes are also exempt because they have been placed on the long-term rental market, are annexes, or are tied to the occupier’s employment.
Despite the drop in liable properties, the surcharge is still expected to raise around £460 million in the 2025/26 financial year compared to the previous year. By comparison, the surcharge in Wales raises around £50 million. Yet the longer-term outlook is less certain. As council tax bills mount, more second homeowners may opt to sell, further reducing the pool of properties subject to the premium.
The timing of the council-tax changes coincides with other policy shifts that have made second home ownership less financially attractive. The abolition of the furnished holiday lettings tax regime, which had allowed homeowners to fully deduct their mortgage interest from their taxable income provided they were let for at least 105 days in a tax year, has removed a key incentive for letting out holiday homes. Also, the stamp duty surcharge for buyers of additional homes rose from 3% to 5% in October 2024.
Together, these changes appear to be accelerating the sell-off of second homes in popular holiday destinations. In Scotland’s Argyll and Bute, second homeowners have accounted for 17% of all sellers this year. In Gwynedd, north-west Wales, the figure stands at 15%, and in North Norfolk, 13%.
Meanwhile, the number of second homes being purchased has fallen to a record low. So far this year, second-home purchasers have made up only 0.8% of all buyers across Great Britain, down from 2.1% in 2019 and the lowest level since we started recording the data in 2012.
While the council-tax premium may still achieve its goal of freeing up homes for local residents, it’s clear that the revenue windfall many councils anticipated may be more modest than expected. The policy is already reshaping the second-home market, and is likely to continue doing so. Evidence from Wales where premiums were introduced in 2017, suggests that there may be further falls in the number of second home owners to come.
