Tax talk: Council tax

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After the monthly mortgage payment, council tax is most people’s highest unavoidable monthly outgoing. As a landlord, you’re looking to maximise your profits, so it’s important to know who’s liable to pay it and when, so you can budget properly and make sure you don’t get hit by any unexpected bills.

Landlord or tenant – who pays the council tax?

As far as the council is concerned, the resident, i.e. the person living in the property, is responsible for paying the council tax bill. However, they’ll only bill someone who’s over 18, so it’s a good idea not to let to anyone under that age, even if they’re in full-time employment. At Your Move, we always obtain proof of age as part of our tenant referencing checks and do our best to make sure the tenant can afford all bills associated with the let before we agree a tenancy.

If the tenancy agreement is signed by two people, the council will treat them as jointly and severally liable. If your tenant’s living there alone, you might want to remind them to apply for the 25% single-person discount.

You should be aware that if a tenant leaves a property without giving notice, you’re likely to be liable for the council tax as the owner of the property.

If the property is vacant

In the Autumn Budget, The Chancellor of the Exchequer announced plans to allow councils to charge a 100% premium on council tax on empty properties. That means it’s even more important to keep void periods to an absolute minimum!

Council tax for HMOs

Generally speaking, a single banding is applied to the whole property, with the owner/landlord being responsible for the council tax. This will be the case for most ‘traditional’ HMOs, where rooms are let to fairly transient, unrelated tenants, who share communal facilities. So if you’ve got HMOs, make sure you’ve factored the full council tax cost into the rent charged for the individual units/rooms, and keep an eye on any annual rises.

This isn’t the case for all properties classed as HMOs, though. The Valuation Office Agency (VOA) has come under increasing pressure over recent years from some councils who want bedsits to have their own individual banding. It’s a pretty grey area, because it’s hard for to councils to know which properties are divided into bedsits and what kind of tenants live in them.

As a rough guide, the VOA will only treat a unit as individually liable for a council tax banding if it can clearly and accurately be identified and there isn’t a high turnover of tenants.

Our advice is that you should (if you haven’t already) contact your local council to clarify their policy, so that you can plan ahead and budget properly. And if you’ve got any concerns about whether the rent you’re charging accounts properly for your council tax liability, please come and speak to us – we’re always happy to help.