NFU Cymru has warned that Welsh government tax rules for self-catering accommodation are pushing many diversified farm businesses to breaking point.
Farmers across Wales say they have been encouraged for years to diversify, yet many self-catering units are now falling short of the requirement introduced in April 2023, pushing them into significant council tax liabilities.
The policy requires self-catering properties to be available for 252 days and actually let for 182 days a year to qualify for business rates. Anyone falling short is reclassified as a second home and hit with council tax bills that, in some areas, attract premiums of up to 300%.
For a large number of farm enterprises, what was intended to be a supplementary and stabilising income stream has instead become a source of financial strain.
In its response to the Welsh government consultation on the classification of self-catering properties for local tax purposes, the union said members consistently report difficulty reaching 182 bookable days.
While ministers have proposed an ‘averaging rule’ to smooth out fluctuations in bookings, NFU Cymru argues that this does not go nearly far enough for genuine Welsh farm-based holiday units.
The union points out that tourism patterns, weather, farming workload and school holiday changes all influence booking levels — factors beyond the control of farm businesses trying to balance core agricultural work with diversified income.
NFU Cymru Rural Affairs Board Chairman Hedd Pugh said many farmers had diversified “in good faith with Welsh government support”, yet around 40% of self-catering businesses now fail to meet the threshold.
“This indicates that the target is simply too high and is stifling confidence, investment and job creation in rural communities,” he said, adding that the union wants a “more realistic figure based on robust data”.
He said members had warned about the impact before the rule was introduced, and that “these concerns have now materialised”, with stress and uncertainty rising at a time when farmers are already grappling with wider financial pressures, including inheritance tax changes.
NFU Cymru also highlighted the broader consequences for rural Wales. Fewer visitors mean less spending in pubs, shops and local services, while the running costs of rural businesses continue to increase.
The recent reduction in school summer holiday weeks, which is set to tighten peak-season demand, is expected to make booking challenges even harder for operators reliant on seasonal trade.
The union is urging Welsh government to adopt a data-driven, flexible solution reflecting the realities of self-catering provision in rural Wales, arguing that a more workable approach would help safeguard vital diversified income streams that support farming families and the rural economy.
NFU Cymru said it will continue pressing for policies that support diversification and the long-term resilience of Welsh farming.
