Headlines strive to be controversial. It’s clickbait. Although the headline here is true to the content, it’s still clickbait. It wants you to read on and even if you don’t, the seed is sown and the mind will recollect from the headline what mattered to it most. We all do it. It’s become a habit to not read further than the first line if it doesn’t catch our attention. We are too easily bored. In my youth and for a long time after I lived by the expression 'believe half of what you read and nothing of what you hear'. This was not to be trusted by the time Facebook and Instagram appeared and was irretrievably ‘unalived’ with the birth of TikTok. We have taken banality and untruths to an unimaginable low, reducing trust and integrity to a shadow of their worth. Well done us.
That’s the interesting bit done. It’s downhill from here on. I wish I could say this was an interesting read but, jeez... Believe me when I say I’ve tried every which way to jazz it up. The sad truth is that this is largely covering facts and figures, and facts and figures do not a juicy blog make. They are, at times, yawngingly tedious. Their point here is to demonstrate how much second home owners and tourism have been targeted over the shortest period of time and the course this has taken. Positively stratospheric.
And so, to business
In small and sparse communities there is a strong sense that local residents should be offered first refusal when a property comes up for sale. The add-on seldom stated but nonetheless clearly implied, is ‘at an affordable price.’ Call me pedantic, but all houses are affordable to those who can afford them. Unfortunately, many of those not yet on the property ladder are barely able to reach the first rung, far less the dizzy heights of a property’s value. Particularly on Tiree where the average 3-bed house is selling for £350,000. Many would happily rent but the influx of new residents to rural areas since the pandemic has exacerbated a long-term lack of available properties in this sector too. And so, almost immediately post-pandemic, the drive to preserve local communities and discourage second-home ownership, with particular focus on rural areas, was begun in earnest.
I could wax lyrical all day and night about the complexities of what some consider to be the straightforward issue of owning an extra house. About the history behind inherited homes that lie empty in The Hebrides. About how a new-build second-home in an area crying out for affordable housing can never serve that purpose. About the importance of not throwing the baby out with the bath-water when seeking economic solutions for rural areas dependent on tourism. But we’re not doing that today. Today we are attempting to set out in layman's terms the route and impact of various legislation that began its journey of execution less than three years ago.
The good old days
Before the pandemic, second-home owners had been having a fairly cushy time of it. The rules were straightforward if you wanted to hold on to your property. You had three options: 1. where inherited, allow it to sit empty and fall into a state of disrepair until able to be upgraded or bequeathed; 2. whether inherited orpurchased, retain it purely as a rent-free holiday-home for family and friends; 3. make a steady income from it as a holiday-let.
It was common practice for many second home owners in the Hebrides to register their property with local councils as self-catering businesses. This was not underhand practice or exploiting any loophole. It was something a local council may encourage and advise. There was a form to fill. Eligibility required only that the property was fully furnished and a holiday let. Those self-catering businesses, just like all other businesses, were liable to pay non-domestic rates (NDR) rather than Council Tax. All good and well. Except for a wonderful scheme known as the Islands and Remote Areas Hospitality Relief fund (1) which offered rural businesses on the NDR tariff a 100% discount. This exemption still applies today and Yellow Hare benefits from it. Therefore, second homes registered as holiday lets did not pay rates or council tax because holiday-lets were treated as businesses.
With no effective way of monitoring second homes registered on the NDR tariff as self-catering properties, including whether or not a property was actually being used as a holiday let, the system was fairly easy to exploit. The average household on Tiree was at that time paying around £1400 annually in council tax, whilst those on the NDR tariff were exempt.
And then along came regulation
Three years ago, everything began to change. In April 2022, the rules were tightened and proof of occupancy was sought. Second homes on the non-domestic rates tariff had to demonstrate proper and consistent rental occupation of at least 70 nights over a 5-month period (2) Those that could not, were removed from non-domestic rates to council tax. Being on the Council Tax tariff formally altered a property’s status from ‘holiday-let’ to ‘second home,’ paving the way for two further strategic pieces of legislation…
1. Introduction of Licencing for Holiday Lets
The first, in October 2022, obliged those with holiday lets to obtain a licence (3). The licence scheme, now in place throughout Scotland, was initiated by a burgeoning Airbnb trade in Edinburgh that was taking over the city and seen as contributing to the housing crisis by reducing long-term let opportunities. It hadn’t taken home owners and landlords long to calculate the easy profit to be gained from short-term lets rather than long-term, which tripled during Edinburgh Festival Fringe time. All without the headache that comes with being a landlord, and not so much as a Brownie Hostess badge required to get going. Why would you not? Second home owners, people with spare rooms, and all manner of landlords scrambled aboard the gravy train, few were regulated and many unscrupulous. It was never going to last and nor should it have.
Although it received a bad press at the time, registering as a holiday let wasn’t as onerous as many were quick to suggest. Most of the licence application requirements were safety related elements that ought to have been in place in any case. Taking all other costs into consideration, including electrical, gas and safety certification, and council application fees, the average 4-bed licence came in at a cost of around £600. The initial licence is valid for three years, while gas certificates are required to be renewed annually. The average cost of a week’s rental on Tiree is £700. Despite all the hoo-ha created about unacceptable costs to short-term let owners, it really wasn’t much to ask in the scheme of things.
At the same time, Control Zones were introduced around Scotland granting councils the power to more closely scrutinize, and refuse, new licence applications (4). From September 2022, second home owners wishing to register as holiday-lets would be required to make a full Planning Application.
All of this was a step too far for some. Many chose not to register and instead sold up. Others didn’t sell, but stopped renting, keeping their homes empty or for family use two or three weeks of the year. Those that fall into this category now have houses that lie empty for much of the year where previously they were occupied for a significant part of it. Some of the owners that sold up had been in possession of their house for several decades with at least two generations linked to the island. They weren’t keen to give them up but were even less keen to go through the mire of getting them licenced. The irony of this demographic is that by selling rather than securing a licence to rent, they have stimulated a new batch of purchase-investors who can afford to renovate and then short-term let at a much higher rate in order to recoup their costs.
At no time during any of this licencing process did those in need of long-term accommodation find it. Indeed, as a consequence of the new regulations, a local couple turned down the offer of well-placed, otherwise ideally suited and reduced-rate, long-term accommodation because the owner was not fully licenced.
April 2024: Local councils given power to increase council tax on second homes
With Holiday-lets established and licenced, the next bit of legislation turned to second homes, all of which were now on the Council Tax tariff. Following the declaration of a housing emergency in Scotland(*4), local councils were granted the power to increase council tax for second homes in their region by up to 100% (5), and almost all opted to apply the maximum increase. Only Glasgow, Falkirk and Ayr chose not to. Holiday Lets – now registered and licensed – remained on the Non-domestic Rates tariff.
Council tax on Tiree this year is set to be just shy of £2226.00 for band D, taking the cost to £4,452 for second home owners, an increase of £400 on last year. Of all legislative changes in recent years, this carries the greatest financial penalty, not least because it more often affects inherited properties and is a cost that cannot be recouped.
July 2024: Visitor Levy (Scotland) Act Scheme
The latest development is the Visitor Levy (Scotland) Act 2024 (6) which came in to force in July 2024. It gives all councils in Scotland powers to apply a Visitor Levy to anyone using overnight accommodation. There are few exceptions. It’s misleadingly referred to as a Tourist Tax when in fact you needn’t be a tourist at all. Workers, regular or otherwise, will be included.
The visitor levy begins in Edinburgh in July this year. It is due to be implemented across Argyll & Bute by January 2027 (7). As with the Holiday Let Licence, much of its format aligns with the Edinburgh model (8).
This is about plugging the spiralling cost of infrastructure in densely populated tourist hot-spots and providing a more positive experience for the visitor than many cash-strapped councils are currently able to. Council Tax budgets are increasingly under pressure to perform better and go further, and it’s the local resident who is footing the bill with year-on-year Council Tax increases.
Of all the changes and charges affecting tourism and second home owners in recent years, this is the one I instinctively baulked at the most and have come round to wholeheartedly supporting. I struggle to imagine a simpler way of plugging and boosting an ever-growing deficit. Visitor tax has been successfully applied in twenty four countries around the world for years. Many of us travel in blissful ignorance of it.
As for the cost to travellers, it really is not very much at all. It isn’t even decided at this point whether Argyll & Bute will include all accommodation providers in the tariff, but let’s assume they are adopting the Edinburgh model to the letter and applying the 5% rule and that it applies to all. It would go something like this:
Six adults rent a property on Tiree at a cost of £800 for seven nights. This represents £114 per night. The 5% Visitor Levy on five nights would total £26.50 – the equivalent of £4.50 in total for each guest (90p per night).
The levy is applied to the accommodation charge rather than the individual. If you are a parent sharing a hotel room with three children, you will pay the same 5% levy as a single adult occupying the same room. And so, if a family room was £150 per night, the levy would increase that to £157.50, regardless of how many are occupying the room.
One adult in a tent paying £15 per night for his pitch (extras like showers and chargeable facilities do not count). He/she/they will pay an additional cost of 75p per night, again for a maximum of five nights.
Edinburgh Council is looking at reimbursing accommodation providers with 2% of the visitor levy to cover costs, and there's every chance that Argyll & Bute Council may opt to do the same.
The only predictable issue that has the potential to affect accommodation providers financially is VAT. Those who are VAT registered will have to pay VAT on the Visitor Levy charges, and those who are not, may be tipped over the VAT threshold. Legislation states "It's at the discretion of the local authority to include or exclude businesses that fall below the VAT threshold because of the visitor levy scheme. A local authority must state whether it intends to include businesses below the VAT threshold in its visitor levy scheme." Those are issues to be thrashed out over the coming months.
This is not something accommodation providers hide in their accommodation costs: it would be prudent to highlight the Visitor Levy separately as a cost that the accommodation provider is not profiting from and applies to the entire region.
The question of whether or not Argyll & Bute Council ought to apply a Visitor Levy is academic. Its fate in this regard was sealed with the passing of the Act in July. The allure of the revenue it promises is much too enticing. It is estimated that the Argyll & Bute Visitor Levy could generate nine million pounds per year (9). It rests at around fifty million pounds for Edinburgh. Applying energy to prevent it is taking focus away from the far more important issue of debating how revenue ought to be allocated and, more crucially, ensuring that Tiree gets its fair share.
I struggle to imagine the visitor levy impacting on visitor numbers. Many of us have been travelling to tourist tax countries for years without even thinking about it. There are several other issues closer to home that are far more likely to impact on Tiree’s tourism and business sector, such as the condition of our roads, the lack of bins, lack of resources, ferry issues, lack of signage, the loss of the library, etc., etc., the list could go on, and all of which a visitor levy might feasibly improve. A dedicated tourist fund would also reduce pressure on the Council Tax budget, which can only be a good thing for council tax payers.
Yes, perhaps my glasses are a tad rose-tinted. But then again, I always was an eternal optimist. Time to place your bets.
EDIT: Legislation states that each council adopting the Visitor Levy must indicate how they plan to use funds, that this must be pre-determined, and that it must be used for tourism-related services and facilities (11).
Yes, yes, so it's all targeted at you with the second home. Don't take it personally.
Home licensing, double Council Tax, visitor levy - and we haven't touched on the removal of the lesser-known tax allowance for unfurnished second homes, the increase of additional dwelling tax to 8% for a second-home purchase, and the 8% increase on Captial Gains when you sell. All introduced in the past year.
No matter how you see things or what stance you may take, be it as a visitor or holiday-home owner, it is crystal clear just how much second-home owners are being targeted and anyone in that category could be forgiven for feeling persecuted. Naturally, you would question the wisdom of a government which seems hell bent on crippling tourism; it's the tourist industry above all else which depends so heavily on the accommodation provided by those additional properties.
It would be easy to see it all that way, and completely ignore what's really happening because it's less palatable, doesn't help your profits, and who cares anyway. The reality is that these legislative changes are all about raising much needed cash to help tourist-shared infrastructure and grossly-underfunded local services. Second home owners and tourists are the easy target because, well, the resources to be had from them are hiding in plain sight. And yes, I've over-simplified the issue, but that's the bottom line. Scotland, and the wider UK, has been woefully neglectful in some areas of its social responsibilities for decades . These are taxes. Unwanted, money-grabbing, irritating taxes. No more, no less.
In each example above; home-let licensing, additional council tax and the visitor levy - none of it should leave anyone with a second-home bereft of profit. Far from it. Since the dawn of time and house-building, buying property remains the easiest way to turn a buck. And yes, there are pitfalls and sometimes it can fail for a variety of reasons, but if you remain within the safe zone - buy at a fair price, choose your location well, retain for several years and sell when the market is settled or bouyant - it's difficult to lose on property. And that's without using it as a holiday rental. If you were to buy a place and leave it to do its own thing, only maintaining it where necessary, it would still deliver you a profit over time. The important point here which, if we are honest, most second-home owners seldom give thought to, is that for around 90% of the population on Tiree and Scotland as a whole, this is not a conversation they will be having. The majority can't afford a first home far less a second. Second home ownership is a privilege available to around 1% of the population and which pays handsomely. Noteably, this figure has almost halved in fifteen years (10). We receive no sympathy and nor should we expect it.
Plus it's not all bad; there are some second-home benefits:
You now have three years to decide whether a new purchase will become your main home where previously this was eighteen months. Doing so allows you to claim back any additional dwelling tax paid on the second home at the point of purchase.
Inherited property will not count as an additional property if you inherit it whilst in the process of buying another (what are the chances). Although they'll get you on the return leg when you try to sell... or if you buy another - this rule only applies to the here-and-now.
If you share the cost an additional property and your contribution is less than £40,000 you will not be liable to pay an additional dwelling supplement.
There we go - ended on a high note! Cup of tea, anyone?
REFERENCES
Small Business Bonus Scheme https://www.mygov.scot/non-domestic-rates-relief/small-business
Changes to council tax and non-domestic rates https://www.argyll-bute.gov.uk/council-tax-and-benefits/council-tax/changes-council-tax-and-non-domestic-rates-self-catering
‘due to a consistent reduction in available housing’ https://www.argyll-bute.gov.uk/sites/default/files/2024-11/HOUSING%20EMERGENCY%20-%20LOCAL%20HOUSING%20STRATEGY%20ANNUAL%20UPDATE%20November%202024.pdf
https://www.parliament.scot/bills-and-laws/bills/s6/visitor-levy-scotland-bill
"The proposed income to be generated from the implementation of a 5% rate modelled independently by professors from the University of Edinburgh Business School (in-kind support). Similar work was undertaken to assess the forecasts for the City of Edinburgh Council." https://www.argyll-bute.gov.uk/moderngov/documents/s215264/ARGYLL%20AND%20BUTE%20COUNCIL%20DRAFT%20VISITOR%20LEVY%20SCHEME.pdf
Visitor Levy Scheme based on Edinburgh model: https://www.edinburgh.gov.uk/business/visitor-levy-edinburgh/2
"Indications are that a levy set at 5% could raise over £9 million gross per year (before estimated set up costs of £215k and ongoing annual running costs estimated to be £460k, or other deductions such as for exemptions) for services and infrastructure supporting Argyll and Bute’s visitor economy and residents." https://www.argyll-bute.gov.uk/my-community/recreation-and-leisure/argyll-and-bute-visitor-levy-your-voice-matters/visitor-levy#:~:text=set%20up%20costs.-,Indications%20are%20that%20a%20levy%20set%20at%205%25%20could%20raise,Bute's%20visitor%20economy%20and%20residents.
https://www.legislation.gov.uk/asp/2024/8/section/19/enacted
Kate MacLeod 2025
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