Who should pay council tax on a property?

Last reviewed 11th January 2024

What is Council Tax?

Council Tax was introduced on residential property in England, Wales and Scotland in 1992 so that local authorities can fund the local services they are responsible for providing.

Properties are assessed by ‘band' with the highest rated properties liable for higher Council Tax payments.

How are properties valued for Council Tax purposes?

The Valuation Office Agency (VOA) values properties for Council Tax purposes based on the amount which the property would have sold for on the open market by a willing vendor on 1 April 1991, even if the property was constructed or adapted after that date. Once the property has been allocated a value it is then placed in one of eight bands (A-H).

There is a searchable database of every property in England and Wales and the VOA Council Tax Manual provides detailed guidance to Council Tax valuation officers to reach a decision about applying Council Tax bands.

How is a property assessed if it contains a number of flats?

Each living space within a single building occupied exclusively by a separate household usually has its own Council Tax band.

For example, in the case of a house converted into self-contained flats, each flat will have its own Council Tax band.

Who decides when a property has entered a new band and how is this decided?

When a property remains a single property but is improved in other ways e.g. an extension is built, the VOA will review the existing band of that property when it is sold or a lease is granted or extended.

In certain circumstances the owner of the property may challenge the valuation band by making a “proposal” to alter the Council Tax valuation list. This will happen when there has been a material increase or decrease in value of the property.

The change in value has to be as a result of the circumstances of the property, not simply because of a rise or fall in local house prices. These circumstances include: demolition of part of the property, physical changes in the area which could affect the value of the property, and conversion of the property into flats.

What is the procedure for challenging a Council Tax valuation?

If an owner receives a notice from the Listing Officer advising that they have altered the entry for the property in the Council Tax Valuation List, the owner has six months to make a proposal if he/she does not agree with the change. If the Valuation Officer does not agree that the property should be rebanded, the owner has a right of appeal to the Valuation Tribunal.

A person who has challenged their Council Tax banding and received a VOA Listing Officer's Decision, may appeal direct to the independent valuation tribunal if he/she does not agree with that decision. There may be other circumstances in which the owner has a genuine reason to believe that the property is in the wrong band, in which case they should contact the local Valuation Office who will review the banding and decide whether there is a genuine need to change it.

Who should pay the council tax?

Who should pay the council tax will depend on the occupants and whether the property is let out as a HMO.

Non-HMO properties and Section 257 houses in multiple occupation

For non-HMO properties and Section 257 HMO properties, council tax liability is assigned based on a hierarchy of liability; you should work your way down the list below until you identify the property in question. The table is as follows:

• The resident who is the freeholder (of whole or part)
• The resident who is a leaseholder (including an assured shorthold tenancy) where the tenancy relates to the whole or any part of the building - so long as the tenancy is not shorter in length than another tenancy held by another resident
• A resident who is a Rent Act statutory tenant of the whole or any part of the dwelling
• A resident with a contractual licence to occupy the whole or any part of the dwelling
• Any other resident (this includes a squatter)
• A non-resident "owner" who has an interest of at least six months in the property
• A non-resident "owner" with a longer interest in the property than another non-resident "owner"

From this, you can see that as long as a tenant is resident in the property they are liable for the council tax. The difficulty is in establishing who is liable where someone has a tenancy but there is no longer anyone resident in the property.

HMO properties

For HMO properties in England, liability works differently. The owner of the property is always liable for the council tax if the property is let on a per room basis and the property had one council tax bill.

Due to recent changes which mean almost all HMO should have a single council tax bill, this means that the council tax for room only tenancies will usually be paid by the landlord. 

Where the HMO meets the self-contained house or flat test and  is let on a joint basis, then Government guidance to local authorities suggests that all owners of HMO properties are liable for council tax as of 1st December 2023. However, it appears that is not the case and joint tenants may be held responsible for the council tax where they have a tenancy for the entire property. 

Given the above guidance, it is likely that councils will seek to bill the landlord for council tax. If that is the case then you can point them to Section 2A of the Council Tax (Liability for Owners) Regulations. This makes the person, or persons, with an inferior interest in the whole HMO liable for the council tax (ie the tenants).  

Section 257 HMO

Section 257 HMO are treated differently from other HMO, and follow the normal council tax hierarchy of liability. These properties may also have more than one council tax charge.

What is meant by non-resident

A 'non-resident owner' is anyone who has an agreement to let or own the property for at least six months but does not live in the property. In the hierarchy of responsibility, they always fall below people who are resident in the property, even squatters.

This can either be the owner (the landlord) or someone they lease the property to (the tenant) who has moved out. Crucially, in the hierarchy, someone who controls the property for a shorter period of time takes precedence over someone with an interest for a longer period of time.

So for example, a landlord has a 99-year lease on the property and a tenant has a six-month tenancy agreement. These both confer an interest on the property for their respective time periods (99 years and six months). While the tenant is resident they are responsible for the council tax. In addition to this, if the tenant chooses to move out they would still be higher in the hierarchy of liability for council tax than the landlord because their tenancy is shorter.

My tenant has left the property without providing notice on a periodic tenancy. Are they liable for council tax?

This will depend on the nature of the agreement provided. In the case of Broadley v Leeds City Council the courts decisions was clear that:

• A statutory periodic tenancy is a new tenancy that is created after the original fixed term. As a result, the tenant's interest in the property has started again and was not for a minimum of six-months. This means that if there are no residents in the property the landlord is liable for the council tax.
• A contractual periodic tenancy that states the agreement will continue periodically is part of the original tenancy agreement. As a result, if the original fixed term was for at least six-months, the tenant will be liable for the council tax until they bring their agreement to an end, even if they have left the property.
  
   

The NRLA tenancy agreements create contractual periodic continuations at the end of the fixed term. This means if your tenant does move out without telling you, they will be liable for the council tax.

If I am liable for the council tax and the property is vacant, am I entitled to an exemption?

Before 2013 landlords of unfurnished vacant properties were entitled to a council tax exemption during void periods for refurbishing the property or where the property was vacant for less than six months and substantially unfurnished.

This automatic entitlement has now been revoked but local authorities have the discretion to give a discount of up to 100% for properties that are unoccupied. Landlords should check their local authority websites to see what discounts (if any) are available.

Student exemption from council tax

Where a property is entirely occupied by qualifying students then no council tax will be owed. This is the case even where the landlord would normally be liable for the council tax.

However, this exemption only lasts as long as all the tenants qualify as students. To do this studies must:

• be at least one full year of tuition, study or work experience at a recognised institution
• involve at least 21 hours study per week for at least 24 weeks in the academic or calendar year

Those studying A-Levels can also qualify if they are under 20 and their studies are at least three months long for at least twelve hours a week.

Once anybody in the property is no longer a qualifying student then liability for council tax will be owed.

Council tax disaggregation

Disaggregation is the process by which the Valuation Office (VOA) can ‘split’ a HMO into single units for council tax purposes, meaning landlords and tenants were liable to pay the council tax for each room, rather than for the property as a whole. 

Following a consultation earlier this year, the Government laid regulations on 8th November 2023 that will bring this practice to an end in England (though not in Wales). From 1st December 2023 all HMO (except Section 257 HMO) should have one council tax bill.

Action to take if the property has already been disaggregated

A number of HMO landlords will have disaggregated properties already and it is in their interests to have the property regaggregated as soon as possible. Particularly given the change making the landlord liable for the council tax. How to go about this will depend on whether the property is licensed or not.

Licensed HMO 

If you have a licensed HMO property that has been disaggregated, you should not have to do anything to start the process.  

The VOA has written to local authorities asking for a list of all licensed HMOs in their area.  

The VOA should contact you by the end of January 2024 to inform you of the new council tax banding. 

HMOs that do not require a licence

If your HMO is unlicensed (as it does not require one) the onus will be on you to contact the VOA to challenge the current banding.  

The VOA should then respond to the challenge within four months, with a new council tax band for the whole property.