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How to avoid paying council tax on an empty property

How to avoid paying council tax on an empty property

For any landlord wanting to know how they can avoid paying council tax on an empty property, then this article will help.

Firstly, when a landlord has an empty property, it’s known as a ‘void period’ and the landlord will need to pay the council tax.

How much the bill will be depends on what their local council is charging.

However, some councils offer a 50% discount while the rental property is unoccupied.

It needs to be appreciated that this discount is becoming increasingly difficult to get since the number of unoccupied homes is growing – and not every council will offer it.

Difference between furnished and unfurnished

Difference between furnished and unfurnished

There’s also a difference between whether the property is furnished – that is the landlord has white goods and furniture in the home – or is unfurnished.

It’s usually easier with unfurnished property for a landlord to get an exemption from paying council tax for up to six months.

It’s always a good idea to act quickly should a landlord find that a property is going to be empty because you won’t have any rental income – and you will need to pay the utility bills for this period too.

Liable for paying a tenant’s unpaid council tax bill?

Landlords may also want to know whether they are liable for paying their tenant’s unpaid council tax bill.

The answer is, not usually.

The landlord will need to make clear in their tenancy agreement that the council tax is the responsibility of the tenant and if they do this then there will be no obligation for them to pay should the tenant leave the property with unpaid debts.

But while the property is vacant for any length of time, the landlord is responsible for paying council tax in this period.

Just to make clear – the landlord is not responsible for repaying any council tax bills that should have been met by the tenant while they were living there – and you will need to prove this with a signed tenancy contract.

For landlords without a signed tenancy agreement, it becomes more difficult to convince a local council that they are able to enjoy an exemption if the tenant has moved out early and hasn’t notified them.

The landlord council tax exemption

So, we’ve mentioned that landlords could enjoy a council tax exemption or they may enjoy a discounted rate from their local authority.

For those landlords with a house in multiple occupation (HMO), then you need to check what your tenant status is as to whether you are eligible for a discount.

As an example, if the HMO consists of full-time students and one working adult, then the landlord may enjoy a 25% discount on their council tax bill which they must pay.

Is a landlord exempt from council tax?

While there are some groups of people who are exempt from paying council tax, or may be eligible for a discounted council tax bill, this does not normally include landlords. It will include:

  • Full-time students
  • Live-in carers
  • Any tenant below the age of 18
  • Single occupants will receive a 25% discount.

It’s also important to appreciate that there are some properties that may be exempt from paying council tax. They include:

  • Unfurnished properties could enjoy a six months exemption
  • A recently repaired property may enjoy a six months’ exemption
  • Properties occupied by full-time students
  • Properties with tenants under the age of 18 will have a 50% discount.

Landlord council tax liabilities

It’s also important that a landlord understands their council tax liabilities so they are not caught out by any potential legal issue or even unexpected bills.

Basically, all residential properties that are in England and Wales must pay council tax. There are different rules in Scotland.

For those failing to pay on time, there could be serious legal and financial consequences.

The council tax system is now well established with the liability of those in the property expressed clearly. Put simply, any adult over the age of 18 who lives in the property must pay council tax.

The property owner or landlord will come further down the list of those who are liable for paying before they are.

How properties are assessed for their council tax bill

For those who may not know, all properties are assessed for their council tax bill by the Valuation Office Agency.

They will place the property within a band which goes from A to H, according to the type of housing and its location.

The banding also takes into account the amount that the property may be sold for, and these bands will vary between councils.

That’s why some landlords with properties in the same street but with different local authorities may face a much higher council tax bill during a void period with one council than they would with the other.

Does the tenant or landlord pay council tax?

Does the tenant or landlord pay council tax?

The answer to this question will depend on the type of tenancy agreement that the landlord has in place.

It is usual that for a landlord renting out a property to one or several joint tenants, that it will be made clear that it’s the tenant’s responsibility to pay the tax.

This will also include families, single occupants and shared tenancies.

Under the circumstances, the council tax bills will be sent directly to the tenant from the local council.

The landlord will not be involved at all – or they should not be. Should a landlord receive a council tax bill then they need to contact the council to rectify the situation.

This is also the reason why landlords need to be prompt in telling their local council that a tenant has moved out – and when a new tenant is moving in.

However, for those landlords who are renting a property to several tenants and has individual tenancy agreements in place – usually because they are renting out a HMO – then you will be responsible for paying council tax. Undoubtedly, the cost of this bill will be added to any rent.

Landlord council tax responsibilities

It’s important that a landlord stays on top of their council tax responsibilities so they can avoid any unexpected bills. These tips will help:

  • Always make clear who is responsible in the tenancy agreement for paying council tax
  • Retain a signed agreement of this contract
  • Always tell the local authority of a tenancy change and give the names of the new tenants
  • Always plan for void periods in case you need to pay council tax
  • Always check for any council tax exemptions or discounts that you may be eligible for
  • Always try to minimise a void period, so you avoid paying council tax bill
  • And for those landlords with a HMO property and who is liable for paying council tax, then you’ll need to factor in this extra cost to the rent price.

However, when you come to file a tax return, you can claim the cost of the council tax you have paid during a void period against your final tax bill as a business expense. While this will help financially, you still need to pay the council tax in the first place.

What happens if a landlord cannot pay their council tax bill

While we have looked at what the council tax is for landlords and their need to pay it and under which circumstances, it’s also worth considering what happens if a landlord cannot pay their council tax bill.

For example, it may be that a landlord has had to evict their tenant from a property for non-payment of rent. This means that there will be a large rent arrears bill and while the landlord is not responsible for paying the council tax while the tenant lived there, there may be an impact on cash flow.

And since council tax is one of the highest of taxes currently, this is a situation that a landlord will need to address if they cannot pay the council tax bill on an empty property.

Their first step should be to contact the local council to explain the situation and ask them for help.

We have explained that not all councils offer exemptions or discounts when a rental property is empty, but they may be understanding if a landlord is in financial difficulty.

It may be that the council defers the council tax payment until tenants are in the property once more, and they may even discuss a way to pay off the outstanding council tax bill over a period of time.

It is important to communicate as early as possible and be honest about your situation.

Government advice about council tax for landlords

For those landlords who are concerned about paying council tax on an empty property, there’s a good government website offering lots of help and advice.

The advice makes clear that when a home is empty that the council tax will still need to be paid and some councils are able to give a discount, but how much is entirely up to them. Some councils may not give landlords a discount.

It also needs to be appreciated that if the property is left empty for at least two years that the local council can double their council tax charge.

The only way to avoid this extra charge is if the property is empty because it is an annex or the owner is in the Armed Forces.

Ways that a landlord can use to avoid paying council tax

Government advice about council tax for landlords

So, while we have looked at the ways that a landlord can use to avoid paying council tax on an empty property, the bottom line is that they will more than likely still need to pay.

It’s certainly worth checking with the local council, and many have excellent websites offering this information, to see whether they have a discount offering or an exception period that you can apply for. These offers may be time limited, so it means a landlord will need to act quickly to get new tenants.

Having void periods is part and parcel of being a landlord and as part of their business model, landlords will need to build in an element of preparing financially for these voids when they set their rent price.

This amount doesn’t have to be huge, but a landlord should be looking at avoiding making any payment at all as this will affect the profitability of their property investment.

This may also mean that landlords may profit from using a letting agent because they will have experience in:

  • Dealing with void periods
  • Applying for council discounts and exemptions
  • Sourcing new tenants quickly.

This last point is very important because the longer a rental property is empty, the more it will cost a landlord.

A good letting agent

Having a good letting agent in place means they are likely to have a list of potential tenants who will be interested in moving into the property as quickly as possible.

Indeed, as soon as the current tenant informs a landlord that they are leaving, this is the prompt to find new tenants, so there is no void period.

That’s what would happen in an ideal world, but in reality the landlord will be looking at tenants who will need to serve notice on where they are living currently.

In addition, landlords are also facing extra costs in recruiting new tenants in addition to paying their council tax and utility bills on an empty property.

There’s no easy answer to finding out the answer to the question of how a landlord can avoid paying council tax on an empty property other than contacting their local authority as soon as possible to see what is potentially on offer.

It’s also important that for landlords who may live some distance from their rental home that they act quickly in contacting the council – and organising for new tenants. This will be a bust time trying to source and check new tenants, clean the property and check the inventory and there are no short cuts.

There’s no doubt that for the price of a phone call, the landlord may end up saving money while maintaining a quality rental property for good tenants in the area by simply asking for a council tax bill exemption or discount. It’s always worth finding out!

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