Have you ever wondered who pays council tax on rented property? It is often unclear who is responsible for paying council tax on a rental property, and the answers given in various sources are often incorrect. Not only that, but in other instances, you can get two different answers from two different people. And both answers may, in fact, be true. Sometimes the tenant pays the council tax, but the landlord is responsible in other instances: it all depends on the circumstances.
The tenancy agreement for a rented property almost always has a clause stating that the renter is responsible for paying the property’s council tax as well as other utility bills. However, things become slightly unclear when considering other factors, such as vacant periods and houses in multiple occupation (HMO).
With that said, let’s get into it and find out a little more about council tax and who has to pay it.
Who Pays Council Tax On Rented Property?
What Is Council Tax?
Council tax is an annual fee issued by your local authority to cover the costs of the services it offers, such as police and fire services, leisure and recreation facilities, waste disposal, and road maintenance. Typically, it is paid in 10 or 12 monthly installments.
In essence, council tax is determined by the value of residential properties and imposed by the local authority. Council tax was first implemented in 1993 to replace the infamous poll tax, and it has been in effect ever since.
From a government perspective, it has been a huge success. A quarter of all local government spending is reportedly covered by council tax, and the tax had a remarkable 97% collection rate, implying that practically everyone pays their share.
Of course, there are ways of not paying council tax, but these rely on specific circumstances.
Who Pays Council Tax On Rented Property?
Although all residential properties in England and Wales must pay council tax, it is not always clear who will make the payment. So who pays council tax on rented property?
The first thing to consider is whether you are the only occupant or if you share a home with others. If you live alone, the responsibility falls on you to pay the council tax. However, a hierarchy needs to be addressed for those who share a home (in ascending order).
- An occupant who lives there and either owns the freehold or the leasehold.
- A tenant on an assured tenancy agreement.
- An occupant who is a licensee (not a tenant but has permission to live there).
- Any resident, such as a squatter.
- The property’s owner, who doesn’t reside there.
Liability is shared equally if there are multiple occupants at the same level. Houses with multiple occupants, when each person has a separate tenancy agreement, are exempt from this hierarchy. In this instance, the council tax bill is the responsibility of the property owner.
The person at the top of the hierarchy pays the council tax in the first instance, and the responsibility goes from top to bottom. Liability is split evenly if there are the same number of occupants at the same level.
Tenants renting out an entire house or apartment on a joint tenancy agreement, regardless of whether they know each other or simply met as tenants, are jointly liable for paying the council tax bill. This is true even if the entire property is rented on a single tenancy agreement.
A landlord is responsible for paying the council tax if they have many tenants under separate tenancy agreements. For example, the landlord would be responsible for paying the council tax if there were four people renting different rooms.
Who Pays When Renting?
A resident tenant ranks as number 2 in the hierarchy. This indicates that the tenant is typically responsible for paying the council tax bill. This is true in most cases, but not always. So, when is the landlord obligated to pay the council tax?
In certain circumstances, the landlord will be responsible for paying the council tax, and it is generally only under these exceptional circumstances that the responsibility is reversed.
Therefore, tenants who fall under one of the following categories may not be required to pay council tax:
- The occupant(s) are under the age of 18.
- The property is a hospital, refuge shelter, or care home.
- The occupant(s) are seeking asylum.
- Temporary housing to cover periods when your primary property is undergoing urgent repairs.
- The property is an HMO (House of Multiple Occupancy), and each resident pays rent separately. Although the landlord is legally obligated to pay council tax, it is possible that the rent will be increased to meet the expense.
When The Responsibility Falls On The Landlord
The landlord is responsible for paying the council tax bill when no tenants reside in the home. Landlords could previously save 50% of their council tax payment when their house was empty. Unfortunately, this is no longer the case today, largely due to the shortage of housing in the UK.
A landlord may be obligated to pay an additional 50% of council tax if a property is vacant for two years. That all depends on which local council presides over the area.
What Happens If You Are Unable To Pay Your Council Tax?
You should get in touch with your local authority and request assistance if you find yourself in a situation where you are unable to pay your council tax. Avoiding paying council tax is sure to land you in hot water. Even after one missed payment, you will receive a reminder letter with a seven-day payment deadline. You also risk losing the option to pay your council tax in installments if you fail to make your payment within the specified time frame.
It is advisable to speak with professionals if you are experiencing financial difficulty. You might want to reach out to an organisation such as Citizens Advice or the National Debtline.
In failing to pay your council tax, the local authority has the power to deduct the amount from any benefits you receive or even have bailiffs seize your belongings to cover the cost.
What Council Tax Discounts Are Available?
There are some discounts offered. However, they typically depend on how many adults live in the house. Those who are excluded fall under the category of “disregarded people”.
Original council tax calculations were based on a couple living in one house. As a result, discounts and even exemptions are available to other people living in a home with just one person.
For instance, a single person renting a home or apartment gets a 25% discount. Also, the majority of those in higher education and those who serve in the armed forces are exempt from paying council tax. Adults under the age of 18, carers, care facility patients, language assistants, and people with severe disabilities are also exempt.
HMO landlords should take advantage of the savings and verify their residents’ occupations. For instance, if there are three tenants—one in full-time education, one in the army, and one in a well-paid profession—the latter is the only one who is required to pay because the other two are exempt. The landlord could request a 25% council tax discount in this situation.
It is important to remember that unless you let your local council know about your situation, they will not automatically apply a reduction. Even then, they might want to see some documentation. Although it might take some time, your discount will be backdated.
Are Landlords Liable For Unpaid Council Tax?
Any unpaid bills when the tenants vacate are not the landlord’s responsibility as long as the tenancy agreement specifies that the tenants are responsible for paying the council tax.
How Council Tax Is Calculated
The value of your property and where you live determine how much council tax you will have to pay. There are eight bands in total, ranging from A to H, and each band specifies the price range that residential properties fall into. The government’s HM Revenue and Customs Valuation Office determine these.
Strangely, and the subject of much controversy, the price at which a house would have been listed for sale on the open market in April 1991 determines which band it belongs to in England. In Wales, the April 2003 valuation date is a more recent date used to estimate the historical valuation.
You’ll need to visit your local council’s website to learn more about your bands and rates. Be mindful that they vary from one local authority to another. For example, while residents of Kensington and Westminster pay just 0.1% of their property’s worth in council tax, individuals who live in communities like Burnley and Hartlepool pay almost 2% of that amount annually.
It is a policy that has come under much scrutiny in recent times. Those in some deprived areas have been known to pay higher rates than some of the wealthiest streets in London.
Final Thoughts
In life, there are a couple of things that are certain – death and taxes. You have to pay tax and will have to for the rest of your life. And when it comes to council tax, it’s there to help keep your area clean and running.
As mentioned, there might be circumstances where you don’t have to pay it. Or in some instances, you can get a reduction in the cost, so it’s always a good idea to check.
To access your council’s website, enter your postcode on the government’s “Pay Your Council Tax” page.
Grow your property potfolio with the right finance for property development, plus understand the yield for each property.
Pingback: How to Avoid Paying Council Tax On An Empty Property? [Possible?] - Welton Property