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Who Pays the Council Tax on Rental Properties?

By 6 min read • October 26, 2023
A stack of pound coins on a council tax bill.

As a landlord, it’s part of your job to understand the ins and outs of who is responsible for paying the council tax on your rental properties. Understanding how it all works can save you from headaches, financial penalties, and even legal action down the line.

While you may not always be the one paying it, you should be able to advise your tenants on whose responsibility it is to pay the bill, how to do so, and where they can apply for exemptions or discounts.

In this article, we’ll provide useful information about the rules surrounding the council tax payment on rental properties. From determining who is responsible for payments to securing exemptions, we’ve got you covered.

Council Tax and Rental Properties

Council tax is a tax on domestic property that has been around since the 1990s. The money collected as council tax is used by local authorities to fund important local services like bin collection, schools, maintaining parks and leisure facilities, and supporting emergency services.

The amount of council tax due for each property is worked out using a banding system devised in the 1990s based on property valuation prices. You can check which council tax band your property falls into on the website. The tax amount varies depending on the property’s designated band and the local authority that it’s in.

Who is Responsible for Paying Council Tax on a Rental Property?

Ok, so now we all know about the important local services that council tax funds, but I’m sure what you really want to know is – who is responsible for paying it?

Because council tax is a charge for local services, it makes sense that it is usually the people who live in the property who foot the bill. However, this isn’t always the case. The person responsible for paying the council tax depends on the specifics of the letting arrangement.

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When is the Tenant Responsible for Council Tax?

When a landlord lets an entire property to one person, a family, or joint tenants, paying the bill is the tenants’ responsibility. If the tenants share the property under a joint tenancy agreement, they are jointly liable for council tax and are free to split the bill or work out who will pay what.

Once a tenancy agreement has ended, responsibility for the council tax falls back on the landlord.

When is the Landlord Responsible for Council Tax?

Whilst, more often than not, the tenant pays the council tax, some circumstances require the landlord to cover the payment instead.

The most common example is houses in multiple occupancy (HMOs), where each tenant has their own separate tenancy agreement. In this instance, the landlord is responsible for paying the council tax. The landlord would usually factor the cost of council tax into the price they charge their tenants for rent. Usually, the tenant still funds the council tax, but the landlord physically pays it.

Council tax is also the landlord’s responsibility if no one over 18 lives in the property or if the tenant is a lodger living within the landlord’s home.

Council Tax on Empty Properties

Now we’re clear about who’s responsible for paying the council tax under what circumstances, but what about when the property is vacant?

Maybe you’ve had a tenant move out suddenly, and you’re still searching for the next one. Unfortunately, you’re not off the hook for paying council tax just because the property is empty. You do, however, have a little bit of breathing room. An unfurnished rental property can be vacant for seven days before the landlord becomes liable for council tax. This usually gives landlords enough leeway between tenancies to move one tenant out and the next in.

However, if the market is moving slower than usual, or you need a little longer to clean and redecorate the property between tenancies, the property may remain empty for over seven days. If this is the case, you’ll again be responsible for paying the council tax on the property until your next tenant moves in.

Some local authorities offer discounts for empty and unfurnished properties, but the rules vary widely from one authority to the next, so you’ll need to speak to them for more information.

Council Tax for Houses in Multiple Occupation (HMOs)

While it is usually the tenant who is responsible for paying the council tax, tenants living in houses in multiple occupation (HMOs) are an exception to this rule. When it comes to HMOs, the landlord is responsible for paying the council tax.

So, what qualifies as an HMO? An HMO is a property rented out to at least three people who form more than one household but share facilities like the bathroom, kitchen, or living space. Most HMO landlords factor in the cost of council tax when calculating how much rent to charge their tenants.

Council Tax for Student HMOs

HMOs are a popular living arrangement for students, meaning many HMOs are student lets. Student landlords should be aware of the rules surrounding council tax exemption for students. The household is exempt from paying council tax if the property is occupied solely by full-time qualifying students. For council tax purposes, for university or college students to be classed as full-time, the course must last at least 24 weeks in the year and involve at least 21 hours of study a week. For 18 and 19-year-olds on non-advanced courses like A-levels, the course must last at least three months and involve at least 12 hours of study a week.

It’s important to note that every tenant within the property must be a student to qualify for the exemption. Even if there are three students and just one non-student, the household is no longer exempt. In this instance, the bill would be issued in the name of the non-student, and then it is down to the tenants to decide how this bill is covered. Even if the household is exempt from paying council tax, the tenants will still need to apply for the exemption. Many students are living away from home and managing bills for the first time, so it can be useful if the landlord provides advice on whether council tax is due, how to pay it, or where to apply for an exemption.

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This free landlord guide will help you to learn the tried and tested ways to make your HMO rental property a success. Written by expert HMO landlord of 50 years, Mary Latham.

Council Tax Exemptions and Discounts

Aside from the student discounts listed above, you may be wondering, can anyone else get an exemption or discount on their council tax?

The answer is yes; you may well encounter other tenant types that may not need to pay the full amount or, in some cases, not pay anything at all. However, there are very specific criteria for getting a discount, so it’s always best to check the details on the government website.

Tenant types that may be eligible for a discount on their council tax include those who are:

  • A single occupant of a property.
  • Under 18 years old.
  • 18 or 19 years old and in full-time education.
  • A full-time student at college or university.
  • Under 25 years old and funded by the Education and Skills Funding Agency.
  • On an apprenticeship scheme.
  • A student nurse.
  • A foreign language assistant registered with the British Council.
  • Severely mentally impaired.
  • A live-in carer for someone not your partner, spouse, or child under 18.
  • A diplomat.

If a tenant is eligible for a discount, they must apply for a council tax discount through the government website.

Is the Landlord Liable for Unpaid Council Tax?

Tenants that stop paying their bills or up-sticks and leave unexpectedly can cause landlords many unexpected costs. The good news is that council tax is unlikely to be one of them unless the property in question is an HMO.

If the tenant is responsible for paying council tax on a property and they do not pay it, or they abandon the tenancy, then they are still liable for the payments – it does not default to the landlord.

Tips for Landlords Managing Council Tax

Managing the council tax on your rental property is usually quite straightforward, providing everyone has clarity on their role and responsibilities when it comes to footing the bill.

As a landlord, you can pave the way for a hassle-free experience by ensuring your tenants are well-informed on council tax rules and guidelines. This benefits you and allows you to help your tenants navigate the council tax maze too.

We’ve compiled a few useful tips for ensuring your rental property’s council tax affairs run smoothly.

Highlight Council Tax Responsibilities in the Tenancy Agreement

Before tenants even move into a property, sit down with them and run through the tenancy agreement terms, highlighting the section about who is responsible for paying the council tax. This way, everyone is clear from the start about who will be paying the council tax and what steps they need to take.

Advise Tenants About Exemptions and Discounts

Even if your tenants qualify for an exemption or discount, they won’t automatically get it; they first need to apply. It can help to advise tenants that they need to apply and the process for doing so to avoid any complications later down the line.

Inform Your Local Authority About Each Change of Tenancy

Every time one tenancy ends and a new tenant moves in, you must inform your local authority as soon as possible. This helps them to keep their records straight and ensures that the right person is getting billed.

Budget for Unexpected Void Periods

Life as a landlord doesn’t always run smoothly. If you are unexpectedly left with an empty rental property, it’s useful to have a bit of a financial cushion to cover council tax during unforeseen void periods.

Include Council Tax When Calculating HMO Rent

If you’re running a house in multiple occupation, include the cost of council tax in the price of rent, but don’t forget to be transparent with tenants about this.

Minimise Void Periods

An empty property is a financial burden for landlords in more ways than just council tax payments. Implement strategies to keep void periods to a minimum.

Claim Council Tax on Your Tax Return

Last but not least, don’t forget to claim the cost of council tax as an expense when you file your tax return.

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