Holiday cottage owners fear Burnham’s proposed tax hike could force them to close their business

Holiday cottage owners have warned that they may be forced to close their businesses if proposed tax hikes on holiday lets go ahead.

The government has reportedly drawn up plans to introduce a tax for holiday cottages ahead of Andy Burnham’s first Budget, classing them as second homes rather than businesses.

The move could add thousands of pounds to the cost of running them, with tourism bosses warning that owners may be forced to sell up with a “catastrophic knock-on effect” on local businesses.

Molly and Matthew James, who run Croft Farm Holiday Cottages near Perranporth in Cornwall, told The Independent that the move would leave them between “a bit of a rock and a hard place” as they were already struggling to make ends meet after Storm Goretti tore down 43 trees on their property, which they are still dealing with months on.

When Ms James saw news of the proposed tax on holiday homes, she said she “didn’t know how to process it.”

“I think we’d have to close, but I also think we would struggle to sell, so I don’t really know what we’d do,” she said. “So we can’t sell because to try and find a buyer for something like this is quite tricky, we can't sell them off individually because they're not residential.

“We sleep 27 across the five cottages, that's 27 beds that have been under high demand this summer, that's 27 per week spending power not being used in our local economy.”

The visitor economy sector makes up 15 per cent of the Cornish economy, according to Cornwall Opportunities, with £2 billion of visitor spend annually.

The couple have been running the holiday let since 2013 after they moved their children down from Bristol for a different life.

While they managed to build up a steady business over seven years, they said that “every single penny went” after Covid lost them custom and the cost of maintenance has increased year on year since.

“These last six years have been insane,” Ms James said. “We are a small business, but our turnover is under the VAT threshold and therefore you'd think there'd be some support there, but although it's not a massive amount, we have got business rates this year.”

“We love being part of the holiday industry,” Ms James said. “98 per cent of the people are absolutely lovely and it's really nice sharing your time with them, and sharing our space. We're really lucky to have a beautiful space here and even post Storm Goretti, it's still a stunning location next to some of the most beautiful beaches that we really want people to come and enjoy.”

Director of Toad Hall Cottages agency James Norton, which represents over a thousand properties across the south-west, said that local businesses in the area would be affected if the holiday home sector crumbled.

“We've had council tax premiums, we've had rises in business rates, we had the furnished holiday abolition, we've had obviously national insurance increases as an employer which has affected everyone around her. We've also had increased fire regulations,” he told The Independent. “There's been so many things that that just sound like words on paper, but when you look at what they actually mean, it's really decimating the industry.

“We're losing a lot of holiday cottage owners for whom it's just not economically viable anymore, and I think there's a misconception that lots of these people earn good money from having a holiday let and the truth of it is most of them just about cover their mortgage and quite a few of them don't even do that.”

He added that if the holiday let industry declined, “there will be a catastrophic knock-on effect for the tourism businesses in the area.”

“It's the people that own and run the restaurants, the bakeries, the butchers, the shops round here whether it's clothes shops, toy shops, you know it's far ranging.”

A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”