Most landlords who rent out buy to let homes do not have to pay council tax while a tenant is living there, but there are times a landlord has to foot the bill.
The rules are different for houses in multiple occupations (HMOs) and furnished holiday lets.
Council tax is also one of the bills a landlord can include in rent or recover from tenants in certain circumstances.
What is council tax?
Council tax is a payment to a local council that goes towards services like rubbish collection, street lighting, maintaining roads and keeping public buildings in good repair.
It’s normally paid by the person living at a property, regardless if they rent or own the home.
A council tax bill is based on two people living in a home. Discounts are available:
- A 25 per cent discount applies if you live alone or other people in the house are under 18
- Councils may offer a discount if no one is living in the property.
- Full-time students qualify for a 100 per cent discount, so pay no council tax.
Tenants on benefits or low pay can apply for a reduction.
How much do landlords pay?
Three factors determine the amount paid on a property:
- The home’s valuation band in England or Wales
- The council charge for the band
- If you qualify for a discount or exemption
A property’s banding can change if the home is altered. For example:
- Part of the home is knocked down, but not replaced.
- A home is split into two self-contained units as each has a separate council tax band.
- A single home is converted into self-contained flats or a block of flats into a single house.
Other factors can also change a council tax banding, like working from home, local improvements like new roads or leisure facilities, or a nearby home moves up or down a banding.
When do landlords pay council tax?
The general rule is tenants pay when they rent a buy to let home.
Landlords must pay council tax when a property is let as:
- Part of a building (e.g., an HMO let on individual tenancies per room)
- A furnished holiday let
- No payment is due if an HMO or buy to let is rented by full-time students.
Some confusion can arise if a property has no tenants between lets or is under refurbishment.
Local authorities can set their own discounts for empty properties between lets for up to six months, and policies can differ between areas. Homes empty for two years or more face a double charge.
Councils can cut the tax rate for up to 50 per cent on furnished second homes. Again, the rate decision is up to the local council.
Homes rented out furnished holiday lets tend to pay business rates rather than council tax.
Homes under refurbishment can qualify for a discount but generally need to be uninhabitable, which means they have no kitchen and bathroom. When the building work has finished, up to six months discount may apply whilst the property is let.
Derelict homes are usually exempt. A derelict home is considered impossible to live in because of damage from the weather, rot or vandalism and requires major works to become wind and watertight.
If a refurbishment is expected to last more than 12 months, the property owner can appeal to the Valuation Office.
Paying council tax for tenants
If a landlord pays council tax on behalf of a tenant, the money can be recovered as part of the rent or a separate payment, so the Tenant Fees Act does not apply.
However, landlords can only charge for the actual amount of council tax.
To ensure the right person pays, local authorities often ask landlords for a signed and dated copy of a tenancy agreement to cross-check against electoral rolls.
If a tenant runs a business
If a tenant runs a business from a rented home, normally business rates don’t apply as long as they are just using a small part of the home and don’t have people visiting/working at the premises.