Assessment of council tax and second homes in Scotland

During April 2023, the majority of households in Scotland had a 5% rise in council tax, which was consistent with the rises seen in council tax in England. It was anticipated that similar increases would occur in the subsequent year. The surprise declaration by the First Minister at the SNP Conference, to implement a freeze on council tax until April 2025, was met with great appreciation by numerous homeowners. This comes as a relief amidst the ongoing cost of living issue, where escalating costs are placing a burden on the financial stability of many homes. While the Scottish Government will provide complete funding for the council tax freeze to maintain the provision of crucial services, there has been some disapproval of the announcement. Critics argue that determining council tax rates should be the responsibility of local authorities rather than the central government.

Council tax on second homes in Scotland

However, the council tax on second houses will not be subject to a freeze. A second house, for council tax purposes, refers to a dwelling that is not the primary or sole residence of any individual and is occupied for a minimum of 25 days throughout 12 months subject to the Council Tax charge. A collaborative consultation between the Scottish Government and COSLA was conducted from April to July 2023. The purpose of this consultation was to explore the possibility of granting councils the authority to raise council tax on second homes. Additionally, the consultation examined the proposal of increasing the 100% premium on council tax for properties that have remained vacant for a minimum of 12 months. The consultation also deliberated on the potential exemption of some property types from the augmented council tax fees.

Rural and Islands housing legislation update

The Rural and Islands Housing Action Plan, released by the Scottish Government on October 13, 2023, has announced that legislation will be implemented to enable Scottish councils to impose a 100% surcharge on council tax on second houses starting in April 2024. This measure aims to align the council tax treatment of second houses with that of long-term unoccupied dwellings, whereby local authorities are currently permitted to impose a surcharge of 100%.

Scottish Government figures from September 2022 indicate that there were more than 24,000 second residences in Scotland, accounting for 1% of the total residential housing stock. Optimising the utilisation of these preexisting buildings is a crucial component of the Rural Housing Action plan, and the suggested augmentation of council tax for secondary residences aims to facilitate the conversion of more residential structures into habitable flats.

According to current council tax regulations, second homes are eligible for a reduction of up to 50%. However, councils have the authority to reduce this discount to 0%, and the majority of councils already impose the full council tax rate on second homes. A significant number of Scottish councils have expressed their intention to utilise the authority to impose a 100% surcharge on council tax for second homes, should it be implemented.

The rise of council tax on second homes in Scotland

The rise in council tax on second homes in Scotland parallels the implementation of comparable measures in England through the Levelling Up and Regeneration Act 2023. This legislation empowers councils to impose an additional fee of up to 100% on furnished properties that are not utilised as the primary or sole dwelling. Since April 2023, local authorities in Wales have been granted the authority to raise the council tax rate on second houses and vacant properties that have been empty for a long period by a maximum of 300%.

The utilisation of council tax rates as a means to regulate the number of vacant homes, temporary rentals, and secondary residences has undeniably become an established component of housing policy.