Council tax for buy to let properties

Investing in property has always been an attractive option for many in the UK. But while it can be a lucrative venture, navigating the tax landscape for buy to let properties can feel overwhelming.

From council tax, rental income tax and various allowable expenses, understanding your tax obligations is essential for maximising your profits.

Who pays council tax for buy to let properties?

All residential properties are liable for council tax. The band is set by the Valuation Office Agency and is based on the amount the property could be sold for. The cost for each band varies by council.

The responsibility for paying council tax on a BTL property usually falls on the tenants who live in the property. It’s important for landlords to ensure that the tenancy agreement clearly states that the tenants are responsible for paying the council tax. Landlords should also keep a copy of the council tax payment schedule as part of their records for the tenancy.

When are landlords liable for paying council tax for buy to let properties?

In certain circumstances, the landlord may be liable for paying council tax. For example, if the property is vacant or during periods where there are no tenants or if it is classed as a HMO.

Void periods

During times when a property is unoccupied between tenancies, the landlord typically becomes responsible for paying council tax. Most councils will consider the landlord liable for paying council tax on an empty property.

If the property is empty and unfurnished and therefore predominantly inhabitable, some councils offer a temporary exemption or a discount. This can be for one to three months. After this period, landlords are usually responsible for the full council tax amount until a new tenant moves in.

If the property is furnished, it’s less likely that you will be given an exemption. This is because the property will be considered ready for occupancy.

Similarly, if a property is undergoing major repairs or being renovated to make it habitable, a landlord could apply for a short-term void exemption via their council. This could result in a partial or full discount, based on the work being done.

For properties that remain empty for over two years, you could be faced with an extra 50-200% added to the council tax rate. This is designed to encourage landlords to make their property available for occupation.

HMOs and BTL council tax

If the property is a House in Multiple Occupation and the tenants have separate tenancy agreements for their rooms, the landlord may be responsible for paying BTL council tax. For council tax purposes, whether a property is actually classed as a HMO for council tax purposes is set out within Council Tax (Liability for Owners) Regulations 1992.

For council tax liability, a HMO is built or adapted for occupation by people who don’t live as a single household or a dwelling occupied by people who have a tenancy or licence to live in only part of a dwelling, paying rent.

A house which has been divided into separate bedsits is a good example of this. A block of flats would not be classed as a HMO in this scenario, as each flat in the block is a separate, self contained dwelling in its own right.

Student tenancies and council tax

It’s important to note that if you are a student landlord, a property solely occupied by full-time students is exempt from paying council tax. If only one or a couple of your tenants is a full-time student then this blanket exemption does not apply. The same can be said if your property is occupied by part-time students.

Your local council may ask you for proof that your property is only occupied by full-time students whose academic course is at least 12 months in duration. It’s a good idea to have your tenant’s Certificate of Student Status as proof for your local council. Some may accept the student’s university student number and course details as proof.

Understanding council tax bands

Every property will sit within a council tax band. Council tax bands are assigned based on several factors. They range from Band A (the lowest value) to Band H (the highest value).

So, what factors affect the council tax band that your property will be assigned? Firstly, the location of the property. Properties situated in areas with higher property values or better amenities may be assigned to higher bands.

The size and type of the property is also taken into consideration, including the number of bedrooms, bathrooms, additional features such as garages and overall floor space. The age of a property could also impact its assessed value and council tax band.

It’s crucial for landlords to understand their property’s banding and how local councils calculate rates, as this can impact profitability.

Navigating the world of tax as a landlord can be complicated. However, it’s an incredibly important area for a landlord to understand and swot up on! And the learning never stops – remember that tax regulations are continually changing and being updated.

One aspect of finance as a landlord that needn’t be complicated is landlord insurance. At CIA Landlords, we’re here for landlords to explain and assist in all things landlord insurance to ensure that you have the coverage that you deserve for your buy to let.

Get a quote online today or request a callback. Alternatively, you can contact us via our website or give us a call on 01788 818 670.