Who Pays Council Tax On Rented Property? Tenant Or Landlord?
There is usually a section in the tenancy agreement for rented property that requires the tenant to pay council tax, along with other utility bills for the property. However, when it comes to houses in multiple occupation (HMO) and vacant periods, things to start to get confusing.
So, who pays council tax? Are there any discounts? What happens when the property is vacant? Our guide to council tax for landlords and tenants tells you everything you need to know about this tax.
What is Council Tax?
Council tax is an annual fee that your local council charges for the services it provides, like police and fire services, leisure and recreation facilities, refuse collection and highway maintenance. It is generally paid in either 10 or 12 monthly instalments.
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How is Council Tax calculated?
The amount of council tax you pay depends on the value of your home and where you live. There are eight different bands, A to H, and each band covers a price range into which a residential property will fall. Somewhat bizarrely, the band a property falls into depends on its market value in April 2019.
The table below shows the council tax bands in Islington.
Different local authorities have their own bands and rates, so you will need to find your local council and check their website. Enter your postcode into the Governments Pay your Council Tax page to be directed to your council’s website.
So, who pays Council Tax on rented property?
There is a hierarchy of liability that determines who has to pay the council tax.
- A resident owner-occupier who owns the freehold or leasehold
- A resident tenant on an assured tenancy agreement
- A resident who is a licensee, which means they are not a tenant but they do have permission to live there
- Any resident, for example a squatter
- The owner of the property who doesn’t live there
If there are several residents at the same level, liability is shared equally.
This hierarchy does not apply to houses in multiple occupation, that is where the residents have separate tenancy agreements. In this case, the property owner is liable for the council tax bill.
If the whole property is rented out on a single tenancy agreement
Tenants who are renting the whole property on a joint tenancy agreement – whether family, friends or simply people who have ended up as signatories on the same contract – are regarded as jointly responsible for paying the council tax bill.
If the property is rented out to several tenants on separate tenancy agreements
When landlords subdivide their property and rent it out to tenants who all have separate rental agreements, the landlord becomes responsible for paying the council tax. So, if three people rent bedsits in the same flat on individual contracts, the landlord will be responsible for paying the council tax.
When is the landlord responsible for paying Council Tax?
Once there are no tenants in residence, the landlord becomes responsible for paying the council tax bill.
Councils have the right to decide how much of that bill to charge. Not long ago, many councils would have offered landlords a 50% discount on the bill when their property lay empty, but concerns about the growing number of empty properties has changed things. Some councils will charge even when a property lies vacant for a short period between tenancies.
If a property is empty for two years, the landlord may be asked to pay an extra 50% on top of the bill. However, councils do have discretion about how much council tax they charge on a property that is empty because of refurbishment.
Are there Council Tax discounts available?
Many people are either exempt from paying council tax or are eligible to pay it at a discounted rate. For example, a single person occupying a whole house or flat receives a 25% discount. Most full-time students and all members of the armed forces are examples of individuals who are entirely exempt from the charge. Find out more about who has to pay council tax.
Landlords of HMO’s should take advantage of this and check their tenants’ employment status. For example, suppose one tenant is a full-time student, one a private in the army, and one a young professional. The student and the private are exempt from paying council tax, making the young professional the sole adult in the property, entitling the landlord to a 25% discount on the council tax bill.
Is the landlord liable for unpaid council tax?
As long as the tenancy agreement requires the council tax to be paid by the tenants, any unpaid debts when the tenants leave are not the landlord’s responsibility.
If you find yourself in a situation where paying council tax is difficult, you should contact your local authority and ask for help.
Council tax advice for landlords
In summary, landlords should specify who is responsible for paying council tax in the tenancy agreement and budget for the cost of paying this tax between tenancies.
Landlords of HMO’s who are responsible for paying council tax should:
- Include the cost of council tax in the rent to recoup the cost.
- Check the employment status of the tenants in case an exemption applies.
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