Who should pay council tax on a property?

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.

The same will be the case for bedsits where the tenant has exclusive use of facilities, even though those facilities may be outside the door to the bedsit.

However, in the case of an HMO where the tenants share facilities on a joint tenancy, the valuation officer is likely to apply a single band to the whole property.

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?

In most 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.

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.

Contractual & Statutory Periodic Tenancies | Landlord Guide

Last Updated: 30/06/2021

Further information on the differences between contractual and statutory periodic tenancies.

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.

Assured Shorthold Tenancy Agreements (AST)

Last Updated: 26/05/2021

Choose the right assured shorthold tenancy agreement for you.

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.

Who is liable for council tax in a HMO?

Houses in multiple occupation are a difficult area to easily identify council tax liability, as they not only have different rules for liability but also a different definition of HMO that is used specifically for council tax. Both of which can be confusing for landlords; if a property meets the council tax definition of HMO then in these circumstances the hierarchy of liability does not apply. Instead, the owner of the property is always liable for council tax.

What is the definition of a HMO for council tax purposes?

The definition of HMO for council tax purposes is either:

  • The property was originally constructed, or subsequently adapted, for occupation by more than one household 

    or

  • Each person who lives in it is either a tenant or licensee who is only able to occupy part of the property or not liable to pay rent for the whole property.

This will typically mean that the landlord is liable for paying the council tax bill if the HMO has one council tax bill and the tenants let on a room only basis.

Where the property is let on a joint tenancy, or the VOA has disaggregated the property into multiple units paying individual council tax, the tenant will usually be responsible.

HMO because of the tenancy agreement or the occupation rights

Often where the property is let to individual sharers, tenancies are set up so that the tenant does not have a material interest in the whole building. Instead, tenants rent out a room in the property and share access to the communal parts with other tenants. As a result, the tenants are not in control of the whole property and only paying rent for a portion. As a result, the landlord is liable for council tax.

Where the property is let to sharers on a joint tenancy, they are all jointly liable to pay the rent on the whole property. In these cases, the tenants are more than likely liable for the council tax on the property as it is not a HMO for council tax purposes. Landlords should avoid any suggestion within the agreement that each tenant is only liable for a specific portion of the rent or has a specific room if they do wish to rely on this, as this would suggest the intention of the agreement is to provide control over only part of the house.

Houses in Multiple Occupation - Licensing and Management

Last Updated: 23/02/2021

For further information on Houses in Multiple Occupation

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.