Understanding Council Tax for Landlords
Most property investors leave paying council tax to their tenants - but sometimes the liability falls on the landlord.
The rules can change according to who lives in the property or if the home is a holiday let or shared house in multiple occupation.
What is council tax?
Council tax is an annual charge paid to a local council. The council sets the cost, with the money going towards local services, such as rubbish collection, road maintenance and providing parks and libraries.
The tax is paid in 10 monthly instalments, generally from April to the following January.
How much is council tax?
How much council tax is paid on a property is based on its value and where it is in the UK.
Councils in England, Scotland and Wales can set their council tax levels.
Council tax is banded, which means homes are classed according to their value on April 1, 1991. For example, this is the council tax table for Lichfield, Staffordshire:
£40,001 - £52,000
£52,001 - £68,000
£68,001 - £88,000
£88,001 - £120,000
£120,001 - £160,000
£160,001 - £320,000
Don’t forget council tax is paid to the council where the property is located, not to the one where the landlord lives, which is often different.
A home's banding can change if the property is made bigger or smaller, for example, by knocking down a section, building an extension or splitting a house into two or more self-contained flats.
The full council tax payment is based on two adults living in a home. A single adult qualifies for a 25 per cent discount.
Empty properties and council tax
The general rule is the person living in a home pays any council tax due, but this changes for empty homes.
Councils can charge higher council tax on homes left ‘unoccupied and substantially unfurnished’ for two years or more. The aim is to encourage owners to restore empty homes to use.
‘Unoccupied’ means a property is not someone’s primary home.
‘Substantially unfurnished’ is not defined in law but is described as a home without enough furniture for easy living. According to the government, furnished homes can reasonably be expected to contain items like a table, chairs, bed, wardrobe, sofa and white goods, such as a fridge, freezer or cooker.
The empty property premium is the basic council tax due according to the property’s banding plus a premium. In England, the premium is 200 per cent of the basic council tax bill. This can rise to 400 per cent if the home has been empty for ten years.
So, for a band D home in the table above, the council tax with the empty property premium is £2,072 plus £4,144 or £6,216 a year.
A rental void is when a rental property is without a tenant. During this time, the landlord is responsible for any council tax at the standard rate.
The property is exempt from any council tax premium for 12 months.
Empty properties under refurbishment
Homes undergoing significant structural changes or repairs are liable to basic council tax but exempt from any premium for 12 months. Some councils offer a limited council tax discount for homes under refurbishment.
Empty properties for sale
Empty properties for sale are exempt from any council tax premium for 12 months.
Second homes and holiday lets
Homes rented out as holiday lets or second homes can attract a council tax premium, especially if the property is in a tourist location.
A critical difference between a buy-to-let and a second home or holiday let is the owner, not the renter, pays the council tax.
Some furnished self-catering holiday lets may qualify for business rates instead of council tax, but the bar to becoming a holiday let is set high, and the rules vary between England and Wales.
In England, a holiday let qualifies for business rates if the property is available for letting for 140 days and let for at least 70 days in a year.
In Wales, the property must be available to let for 252 days and let for 182 days in any 12 months.
Students and council tax
Households like shared houses in multiple occupation (HMOs) where everyone is a full-time student are exempt from council tax.
To count as a full-time student, you must study for at least 21 hours a week and follow a course that lasts at least 12 months.
For students under 20, the course should last at least three months and study for 12 hours a week.
A discount may still be available if the household includes someone who is not a student.
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