Paying council tax on an empty property - what landlords need to know

Council tax can be a confusing matter at the best of times. When trying to determine whether the property you own or rent out is eligible for a discount or exemption – such as in the case of an empty property –  it can become trickier still. To help you find out if you can avoid paying council tax on an empty property we have put together a comprehensive guide to the most common empty property and council tax queries.

In most situations and even if your property has been empty and unfurnished for two years or more, you will still be required to pay council tax, although your local council may grant you a discount.

Since councils vary in their approach to empty properties and council tax, it is vital to contact your council directly to ensure that you pay the correct and full amount. In some cases, councils can actually charge extra council tax for empty properties.

 

Council tax on second homes

If you are the owner of a second home or a holiday home, then you may be eligible to pay less council tax if it is not your main dwelling. Councils can provide a discount of up to 50 per cent but eligibility is down to each council’s discretion.

 

Council tax on empty properties

In the majority of cases, councils will expect you to pay council tax on an empty property. However, some offer a discount which is subject to no minimum or maximum amount – it is once again up to the individual council’s discretion. A council may also charge up to 100 per cent extra council tax should your property stand empty for over two years, this is also at the discretion of the individual council. It is worth mentioning that rules regarding empty properties are different in Scotland.

There are some instances that automatically exempt you from paying council tax. The first of these is if you are selling a home on behalf of someone who has died. In this instance, you will be liable to start paying council tax six months after you receive a probate.

In addition, there are some properties that are exempt from council tax for as long as they remain vacant. These include homes that have been repossessed, homes belonging to someone who has moved into a care home or hospital or has to live elsewhere due to personal care requirements, homes belonging to someone who is in prison (unless it is for not paying council tax), lawfully uninhabitable properties, and properties that are empty due to compulsory purchase for demolition purposes.

In addition, accommodation for members of the UK armed forces that is owned by the Ministry of Defence (MoD) is exempt from council tax whether it is occupied or not.

There is a further possibility of a council tax discount if the property is undergoing major repair or structural changes, such as the building of an extension.

Your local council will typically inform you of the date from which you must start making council tax payments if your home has been undergoing major improvements or if you are building a new property. This will come in the form of a ‘completion notice’. If you are renting out your property it is always worth considering taking out a landlord insurance policy. This means that you are protected if anything goes wrong since a vacant property or a property undergoing renovation is more vulnerable than an occupied one.

There are also some provisions for derelict properties. A property is only considered derelict if it isn’t at all habitable (this can be due to any kind of extensive damage), or if it requires major structural improvement to make it ‘wind and watertight’ for habitation.

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When does a landlord become liable for council tax?

Both property owners and tenants often get confused about when a landlord becomes liable for council tax. There is a standard hierarchy that shows who is responsible for paying council tax which starts with any adult over 18 years of age who is occupying the property, so a non-resident landlord is not usually responsible for paying council tax.

If there is a joint tenancy, all the named tenants are responsible for payments. If the landlord subdivides the tenancy and rents it out to different tenants, the landlord is responsible for payments.

 

What’s changing for landlords? 

We won’t know for certain what increases or changes to council tax will be announced in the 2021 budget on 3 March. Here are a few recent updates and potential changes to help you prepare.  

 

Council tax increases

In April 2020, the UK Government permitted some local authorities in England to raise council tax charges by up to four per cent. There is much speculation about the increases in council tax we could see in the 2021 budget.

The Chancellor’s spending review in November indicated that some households could see their annual council tax bill increase by more than £200, although most will see more moderate hikes.

 

Council tax relief for vulnerable households – including those affected by COVID-19

On 24 March 2020, the Local Government Secretary announced a £500m hardship fund to provide support for people who have been most affected by coronavirus.

The funding was intended to help vulnerable people and households by offering further reductions in council tax for working-age people in receipt of local council tax support.

At the time of writing there has not been an update on whether this support will continue into the new tax year. We will update readers with the latest guidance as soon as we hear more. 

 

Increases to capital gains tax

Earlier this year the Office of Tax Simplification (OTS) made a number of recommendations to the UK Government regarding capital gains tax. The OTS report, which was published on 11 November 2020, recommended a closer alignment of income tax and capital gains tax rates.

The rates for the sale of second homes are currently 18 per cent for basic rate taxpayers and 28 per cent for higher rate taxpayers. The OTS recommendations, if implemented, would see the tax rate on capital gains tax for buy to let properties rise to 20 per cent for basic rate taxpayers and the rate for higher rate taxpayers rise to 40 per cent.

The report also recommends a significant reduction in the annual tax allowance. The annual amount that’s exempt from capital gains tax currently stands at £12,300. This could be lowered to just £2,000 under the new proposals. 

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As we mentioned at the beginning of this article, local councils vary considerably in their approach to paying council tax on vacant properties. It is therefore always worth calling your local council, armed with relevant documentation and dates, to confirm the extent of your liability.

We understand that landlords will be very keen to find out how the outcomes of the budget on 3 March 2021 will affect their properties and their finances in general. Rest assured, we will be updating this article as soon as we have more information, so please keep checking back and follow our social media feeds for updates. 

For more information read the Government guidelines on council tax for second homes and empty properties.

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