Who pays council tax on rented property?

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Council tax, like a lot of taxes like inheritance tax, aren’t avoidable to pay if you are needing to pay it under the law. Unless you are avoiding it due to having an empty property.

Consequently, council taxes have become one of the most confusing taxes in the UK as everyone has to pay who lives in a house but all at different rates and in different boroughs.

Landlords and tenants have both been seen to pay for council tax. In this article, we will also discuss what you should do if a landlord isn’t able to pay too.

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Do tenants or landlords pay council tax when renting?

When working out who pays tax when renting, either landlords or tenants pay the council tax. It depends on the type of agreement in place. It can get complicated and it can also be hard to understand.  

The truth is, anyone who is a landlord pays council tax. This means if you’re a property owner you will have to pay council tax but this payment can be offset to a tenant too if the landlord wants to pass the responsibility on.

For example, if a council tax bill is £150, most landlords will add on £150 at least to whatever they charge for rent. The exact amount of rent that individual tenants pay is completely up to the agreement in place.

Landlords pay council tax when renting because the occupier isn’t liable for paying council tax under the law. Again, this isn’t to say that rental income cannot be collected from tenants to pay council tax though.

In this sense, it is perfectly normal for a landlord to include the council tax bill on a rental agreement and if a tenant has signed it they will be eligible to pay.

It is also important to understand that the use class that property must be in to pay council tax is a residential property. Corporate lets pay business rates or non-domestic rates.

When are UK Landlords responsible for paying the council tax?

Nine times out of ten, UK landlords are responsible for paying council tax. However, it is important for you to have a eligible to pay council tax apart from in extreme scenarios where it is not mandatory in any borough.

These situations include:

  • If everyone is under the age of 18
  • The property is a care home
  • The property is a hospital
  • The property is a refuge
  • There are asylum seekers in the property
  • When a landlord is housing tenants temporarily

There is the example of having council tax that is paid by tenants in the letting type of HMO’s too where the tenant’s are liable to pay instead of the landlord. This is common in HMO properties but really, the landlord still pays.

How to pay council tax as a tenant in the UK?

If you are a tenant in the UK, One of the easiest ways is to pay your council taxon the government website here. This will enable you to search where you live.

There are also a few other ways to go about it including using corner shops that are located in the local area of where you live. Ask for ‘Payzone’, ‘Paypoint’ or ‘Quickcard’ payments where you can send money.

Once you have received a council tax bill, there are two different types of ways the bill can be issued below. This will usually be delivered through mail as a property document or delivered to you digitally.

The bill to pay council tax as a landlord

Scenario 1: the property is rented on a single tenancy agreement

If a property is rented on a single tenancy agreement, the landlord is responsible for collecting rent from one tenant from one property and then paying rent based on one property. 

This covers all of the council tax payments that must be done on the property as a result. Single tenancy agreements are therefore some of the most straightforward ways to pay council tax. 

In order to pay this type of council tax, the first step would be to prove to the government you own the property through proof of ownership and then show a copy of the tenancy agreement.

Scenario 2: the property is a HMO rented to more than one tenant

If a property is a HMO, a landlord will usually collect one payment of council tax from the entire property but charge each room of the HMO individually. This isn’t the case with all HMO properties but usually how it works.

For instance, a property that has a four bedroom that has a council tax due for £200 for the year could be split four different easy for every room in the HMO so each tenant pays £50.

Alternatively, a landlord could charge each tenant the amount of council tax that is respective of their room size. For instance if the property has two big rooms and two smaller rooms the council tax would be split differently.

A likely split if the council tax was still £200 in this case would be £75 for the bigger rooms and £25 for the smaller two rooms. However, this means tenants who are paying more could end up paying significantly more.

What is Council Tax?

Council tax is a tax placed on anyone living in a property. The rate of council tax is dependent on the valuation band the property is in and the specific rate that the council wants to charge for that band.

The system of paying council tax is worked out to be as fair as it can be to the general population by taking into consideration people’s income and any social or economic disadvantages they may have.

The reason why every borough charges council tax differently is because they all have different expenses and each borough has a different set of challenges and priorities they aim to address.

Why do we pay council tax?

We pay council tax because the money goes towards whatever services a council is running within the borough. For instance, if there are youth clubs or leisure centres then this is likely where the budget will go.

The other forms of tax that are given to the population are usually allocated towards a wider budget for the nation such as going towards the NHS, emergency services and school system of the UK.

When was council tax introduced?

Council tax was introduced on the first of April 1993 in the new tax year. The word council tax was introduced to the UK after they got rid of the “poll tax” which was charged for similar reasons but wasn’t given the banded feature.

So, every income household in the UK was given the same tax to pay which was considered a lot harsher on the poor as the tax they had to pay was not of the same proportion to what they were earning.

How is Council Tax calculated?

Council tax is calculated differently depending on every borough as each borough has different bands. However, every borough is based on the same categories of property price in 1991.

Example council tax bands for a typical London borough

Below is a typical breakdown of how council tax works in a borough in London where council tax tends to be a bit higher. The different bands correspond to the house prices at the time when council tax was introduced.

Band Value of property on April 1991 Average Annual Council Tax example
Band A Up to £40, 000 £1,100
Band B £40,001 to £52,000 £1,400
Band C £52,001 to £68,000 £1,600
Band D £68,001 to £88,000 £1,700
Band E £88,001 to £120,000 £2,200
Band F £120,001 to £160,000 £2,600
Band G £160,001 to £320,000 £3,000
Band H Over £320,001 £3,600

What happens if Council Tax can’t be paid?

First of all, council tax is paid in ten instalments for ten months of the year so there is little reason to fall behind on council tax payments.

There are two months of the year where council tax isn’t due to be paid.

Nonetheless, if you do fall into arrears with your council, the process for paying back the tax is up to them.

Some local authorities will choose to add on additional tax and ask you to pay it back over a long period or some will add interest.

Others will keep your debt the same but allow you to sign up to a payment plan which allows you to make payments without accruing interest.

Are there any Council Tax discounts in the UK?

The easiest way to apply for a council tax discount is by going to this website here. This allows you to quickly check if you fall into the category of not paying council tax or reducing the amount of tax you pay. 

The exact thresholds and the specific discount that can be applied always depends on the council. Which is why no specific figure can be given.

However, typically, there are 25% discount thresholds and 50% thresholds for different things. For example, some councils offer a 25% discount if there is only one adult living in the household.

Others offer a higher discount at perhaps 50% if where you are living is not in the main building of the property such as in a granny annexe.

It is important to note that it is against the law to refuse to pay your council tax if you disagree with it. If you’re a tenant, this will only mean you’ll be in breach of your type of tenancy agreement.

So, if you don’t think a property has the right electrical safety, gas safety or you’re unhappy with your security deposit, you’d have to make sure you’re able to

If you’re a landlord, it means you will have to fall into rent arrears and could face debt collectors and court dates in the future if you continue to refuse to pay.

Who can benefit from council tax discounts?

Council tax benefits are there for those who are struggling economically or simply shouldn’t pay as much council tax logically because of how they are living.

For example, those who are in care homes, disabled, under the age of 18 or are living in a second home as part of their job.

In addition, there is list of further conditions in which councils also apply discounts seen here:

  • If the person applying is in a hospital or care home
  • If they are mentally impaired
  • If they are a remanded prisoner
  • If they are a convicted prisoner
  • If the tenant is a student
  • If the person is a school leaver
  • If the adult is a college leaver
  • If they are working in an apprenticeship
  • A person that is on child benefits
  • If you are the sole caretaker for someone

So, if you’re a tenant and you find yourself in one of the above categories, speak to your landlord who will be able to process this through the council and reduce your council tax payment.

Discounted for people who pay council tax

Conclusion

In general, landlords have to pay council tax in a rented property. Developers also have to worry about council tax because it is usually clear what council tax band you will have to charge tenants in the property once the property is built as part of property planning.

Council tax is difficult to understand because it depends on where you live. On top of this, not everyone agrees with the amount of council tax they pay. Why not use the taxes already being paid through a salary? Also, may believe council tax is so high because there are a lot of people using tricks to get a council house in the UK, eating resources.

If you’re not sure if the council tax you’re paying is reflective of the services that area available to you in your borough, you may be able to bring this up in a social housing white paper.

FAQ

Who is liable for council tax when tenant moves out?

When a tenant moves out, landlords are usually liable for service charge, unless there was some form of agreement in place.

Is council tax divided by tenants?

Council tax is divided by tenants in a HMO. However, sometimes, landlords may choose to pay council tax themself using the income from rent so that tenants don’t necessarily know this is something they are paying for

Can you be liable for council tax on two properties?

Tenants can be liable for council tax on two properties if you have overlapping tenancies for example, or you are renting two places at once. Landlords with multiple property portfolios may also be liable to pay council tax on each property they own

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andreas gerazis

Andreas Gerazis

Experienced landlord

Andreas is a certified landlord with extensive knowledge about the UK property market as he has been actively investing for half a decade. Founder of the first three-in-one property management software, Lofti Proptech, Andreas has a brilliant understanding of the details surrounding what it takes to grow and run a thriving property portfolio.