Local government finance circular 6/2024: council tax on second and long-term unoccupied homes guidance

8. Discretionary powers to vary the discount/increase

8.1 Applying discretion

The existing unoccupied property legislation, and the legislation pertaining to second homes, which has effect from 1 April 2024, is discretionary in nature.

These powers seek to allow local authorities to make decisions about the Council Tax treatment of second and empty homes to determine the balance in the use of housing to meet local needs.

These decisions are for local authorities to make based on the market conditions within their own local area, and the individual circumstances of the occupant. The options that local authorities are empowered to apply includes the standard Council Tax rate, or a discount of up to 50% among others.

It is for local authorities to determine their policy approach in relation to second homes and the use of discretionary powers. This is in line with the existing arrangements for long-term empty homes.

Instead of applying a 100% premium, local authorities may also decide to:

• charge an increase less than 100%
• not charge a Council Tax increase (i.e. charge the standard Council Tax rate)
• offer a higher level of discount (up to 50%)

Local authorities can vary the discount/increase, subject to the limits in the Regulations and exemptions, taking account of the area the home is in, the circumstances of individual owners, and/or other circumstances as a local authority considers appropriate.

Examples of where local authorities may find it beneficial to consider whether to apply discretion could include:

• community or public service impact (e.g. an NHS staff member who might require occupying a second home, and whose main residence is some distance from the hospital).
• local economy impact (e.g. temporary occupation of a property for the purposes of completing constructions works, where that property does not fall within the definition of a Job-Related Dwelling).
• hardship impact (e.g. the occupier would be subject to demonstrable hardship).

Local authorities are best placed to assess the full facts and circumstances of individual cases.

8.2 Second homes

The discretionary nature of the new additional powers mean that local authorities will be able to make decisions in relation to the treatment of second home based on local considerations, including how to achieve the right balance in the use of housing to meet local needs and to support thriving communities.

Local authorities must retain a 50% discount for second homes and empty homes that meet the following descriptions:

• Purpose-built holiday homes – these are chalets or other types of holiday property which are either unsuitable to be occupied all year round (their construction may mean they are only suitable to be lived in during the warmer months) or are not allowed to be lived in all year due to planning, licensing or other restrictions.
• Job-related dwellings - these are homes owned by someone who has to live elsewhere most or all of the time as part of their job, or the home the person occupies to undertake their job if the person has another home that is their main residence. Note, in most circumstances, if someone is occupying a premises as a job-related dwelling, the premises that is not a job-related dwelling should be treated as their sole or main residence and not liable for a second home premium.

Please see Schedule 1 -The Council Tax (Variation for Unoccupied Dwellings) (Scotland) Regulations 2013 (legislation.gov.uk) which provides the legal definition of   

Classes of unoccupied dwellings subject to 50% Council Tax discount.

Armed forces personnel owning a second or empty property in some parts of Scotland may also receive a 50% reduction in their council tax liability when they are stationed elsewhere, depending on their local authority. This is because it may be regarded as a job-related dwelling, and therefore subject to a mandatory 50% council tax discount, depending on how the relevant local authority applies the relevant regulations.

8.3 Long-term empty homes

Under the legislation, local authorities are prevented from using their discretion to vary council tax charges in a way that gives more favourable treatment to empty social rented homes just because they are owned by a social landlord. It is important that all owners take steps to bring homes back into use as soon as possible, rather than leaving them empty.

Examples of where local authorities may find it beneficial to use their discretion in determining whether a premium should apply are:

• a property that is taking a long time to sell/let in a stagnant market despite being priced appropriately
• an Empty Homes Officer has assessed the owner is taking positive steps to re-occupy their property and a time-limited council tax increase “holiday” would encourage the property to be brought back into use sooner