If you own a serviced accommodation property or you’re thinking about starting one, understanding the difference between commercial business rates and council tax is genuinely important. Getting it right can save you thousands of pounds each year, and getting it wrong can land you with unexpected bills or penalties.
We break down exactly how business rates and council tax apply to serviced accommodation in England and Wales, the criteria your property needs to meet, how your bill is actually calculated, and how small business rates relief could significantly reduce what you owe.
What Are Business Rates for Serviced Accommodation?
Business rates are charges applied to properties used for commercial purposes, much like council tax funds local services for domestic properties. Because serviced accommodation operates commercially, it can fall under business rates rather than council tax, provided it meets specific letting thresholds.
The Valuation Office Agency (VOA) assesses your property and assigns it a rateable value based on factors including its type, size, location, quality, and estimated rental income. This rateable value then forms the basis of your annual business rates bill.
What Is the Difference Between Business Rates and Council Tax?
Both business rates and council tax are charges that fund local services, but they apply to fundamentally different types of property use.
Council Tax
Council tax applies to residential and domestic properties. If your serviced accommodation doesn’t meet the commercial letting criteria (or if you primarily use it as a second home rather than letting it to paying guests) you’ll pay council tax. The amount depends on your property’s valuation band and the rates set by your local authority.
Crucially, many councils across England can now charge a second home council tax premium of up to 100%, effectively doubling your bill. In Wales, premiums can reach up to 300%, though as of the 2025-26 financial year, the highest currently applied is 150%.
Business Rates
Business rates apply when your property is used commercially for short-term letting and meets the minimum letting criteria. For many serviced accommodation owners, paying business rates is actually preferable to council tax – particularly because of the potential to claim small business rates relief, which can dramatically reduce or even eliminate your tax bill entirely.
Do I Need to Pay Business Rates or Council Tax on My Serviced Accommodation?
Whether you pay business rates or council tax depends on how frequently your property is available and actually let to paying guests. The criteria differ between England and Wales.
England
Your serviced accommodation property qualifies for business rates if, over the last 12 months, both of the following are true:
- It was available commercially for at least 140 nights in total. This means your property must be genuinely marketed and ready to accept bookings for a minimum of 140 nights across the year, not just theoretically available.
- It was actually let for at least 70 nights. Your property must have been confirmed, paying guests for at least 70 of those nights. Availability alone isn’t enough – you need to demonstrate genuine commercial activity.
You must also be planning to make your property available for short-term commercial letting for at least 140 nights in the next 12 months.
Wales
The thresholds in Wales are considerably higher. Your property must have been available to let for at least 252 nights and actually let for a minimum of 182 nights in any 12-month period. Properties that don’t meet these thresholds will pay council tax instead, and given the potential for significant council tax premiums in Wales, this distinction matters enormously.
If your property currently pays council tax but now meets the business rates criteria, you can apply to the VOA by completing the relevant application form for your country.
What Are the Benefits of Paying Business Rates?
For most serviced accommodation owners, there are two significant advantages to qualifying for business rates rather than council tax.
Avoiding the Second Home Council Tax Premium
If your property doesn’t qualify for business rates, it’s treated as a second home for council tax purposes. With English councils now able to charge premiums of up to 100% on second homes, this can represent a substantial additional cost. Paying business rates removes this premium entirely.
Small Business Rates Relief
This is where the real savings come in. If your serviced accommodation business only uses one property and its rateable value is below £12,000, you won’t pay any business rates at all – a 100% relief. If the rateable value falls between £12,001 and £15,000, you’ll receive relief on a sliding scale. For example, a property with a rateable value of £13,500 would receive 50% relief.
How Are Business Rates Calculated for Serviced Accommodation?
Calculating your business rates involves two straightforward steps.
Step One: Determine Your Rateable Value
The VOA assesses your property’s rateable value based on its estimated open market rental value. You can check your current rateable value on the VOA website. Factors influencing the valuation include your property’s type, size, location, condition, and potential income.
Step Two: Apply the Business Rates Multiplier
Once you have your rateable value, multiply it by the relevant business rates multiplier to calculate your annual bill. The 2025 Autumn Budget introduced lower multipliers specifically for retail, leisure, and hospitality businesses – which includes most serviced accommodation properties.
For the 2026-27 tax year in England:
- Small business multiplier (rateable value under £51,000): 38.2 pence
- Standard multiplier (rateable value £51,000 to £499,999): 43 pence
- Higher multiplier (rateable value £500,000 and above): 50.8 pence
Transitional Relief Caps
For the 2026-27, 2027-28, and 2028-29 financial years, there are caps on how much your business rates bill can increase annually. If your bill rises from April 2026 compared with 2025-26, transitional relief will spread the increase over three to four years, softening the impact. In Wales, any increase greater than £300 is spread evenly over three years.
What About the Council Tax Surcharge from 2028?
The 2025 Autumn Budget announced that from April 2028, properties in England valued above £2 million will face a £2,500 council tax surcharge, rising to £7,500 for properties worth over £5 million. If your serviced accommodation qualifies for business rates rather than council tax, this surcharge won’t apply to you – another compelling reason to ensure your property meets the letting criteria.
What Is the Holiday Let Registration Scheme?
The Government is expected to introduce a mandatory registration scheme for all holiday lets and short-term rental properties in England during 2026. This will create a simple online register providing reliable data on short-term accommodation across the country. While full details are still emerging, the scheme aims to better understand the impact of short-term letting on local communities.
We’d recommend keeping an eye on government updates as more information becomes available, and we’ll continue sharing relevant developments with our clients as they’re announced.
How EasierManagement Supports Serviced Accommodation Landlords
Navigating business rates, council tax thresholds, and constantly shifting regulations is just one of the many complexities of running serviced accommodation. At EasierManagement, we handle the operational side of your property so you can focus on the bigger picture – or simply enjoy a hands-off investment.
Our comprehensive serviced accommodation management service covers everything from 24/7 guest support and professional housekeeping to dynamic pricing that maximises your occupancy and income across the South West. We coordinate with trusted local maintenance teams for rapid response to any issues, manage multi-platform listings to attract consistent bookings, and provide full financial transparency through detailed monthly reports.
Whether you’re running a single property in Bristol or managing a growing portfolio across Bath, Cardiff, or the Cotswolds, we’re here to make the entire process straightforward and stress-free. No hidden fees, no jargon, no guesswork – just honest, transparent property management built around your goals.
Get in touch today for your free property valuation and discover how we can transform your serviced accommodation into a thriving, worry-free investment.
