Council Tax
Resources
Council Tax Introduction
In order to pay for the local services which they are responsible for providing, local authorities levy charges on the community. Businesses, shops and factories are subject to business rates. In England, Wales and Scotland residential property is subject to council tax.
Council tax was introduced in 1992. It replaced the Community Charge, commonly known as poll tax (which had in turn replaced the old household rates in 1988). Further amendments were introduced in 2003, followed by additional amendments coming into effect from 1st April 2013 which changed the rules regarding exemptions and discounts.
A range of statutory instruments govern the detail of how council tax is applied. The key ones are given below.
Information about council tax bandings in England and Wales, making a proposal to change a banding, appeals against a council tax banding and any other details about council tax can be found on the Government website.
There is also a searchable database of every property in England and Wales on the Valuation Office Agency website
Similar information for Scotland is on the Scottish Assessors Association website.
See Additional Resources section for these websites.
Council Tax Valuation
Properties are valued for council tax purposes by the Valuation Office Agency (VOA). The basis on which the property is valued is the amount which it would have sold for on the open market by a willing vendor on 1 April 1991. (This applies 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) for council tax purposes.
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 are sharing facilities the valuation officer may still apply a separate banding to each room(s) rather than a single band to the whole property.)
The rules on separate banding can be complex and more information is available from the Valuation Office.
Changes to council tax valuations, Challenges and Appeals
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.
| When can a challenge by “proposal” be made? |
| If part of the property, for example a garage or an extension, has been demolished (unless the demolition is part of work to improve or adapt the property). |
| If the property has been adapted to make it suitable for use by a physically disabled person. |
| If there have been physical changes in the area which could affect the value of the property. |
| If the property has been converted into flats. |
| If the owner has bought the property, or been granted a lease on a property for seven years or more, and the property’s value has been increased because it was extended by the previous occupier. |
| If the property becomes, or ceases to be, a “composite” property. (A composite property is one which contains both domestic and non-domestic property, such as a shop or public house with living accommodation.) |
| If there is an increase or decrease in the extent of that part of a composite property used for domestic purposes (for example, a domestic living room is converted for use as an extension to the bar area in a public house). |
If the owner receives a notice from the Listing Officer advising him 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 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.
From 1 April 2008, changes were introduced to the way council tax banding appeals are made to the independent valuation tribunal, and follow a government consultation which closed on 27 February 2007. This new process is called Appeals Direct. It does not alter appeal rights, but changes the process of appealing so that it is clear that the appeal is dealt with by an independent body that is separate from the Valuation Office Agency (VOA) and the council.
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.
More details of the appeals procedure is available on the Government website – links can be found in the Additional Resources section.
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.
Liability to pay council tax
Local councils use a list, called the ‘hierarchy of liability’ to decide who is liable to pay council tax on a property. Starting from the top of the list, work down to find the first situation that matches the property to establish who is liable to pay the council tax.
| The Hierarchy of Liability in England: |
| 1. a RESIDENT owner-occupier who owns either the leasehold or freehold of all or part of the property |
| 2. a resident tenant |
| 3. a resident who lives in the property and who is a licensee. This means that they are not a tenant, but have permission to stay there |
| 4. any resident living in the property, for example, a squatter |
| 5. an owner of the property where no one is resident. |
From this list it is clear that in occupied self-contained flats or houses, the tenant is normally liable for Council Tax. Where there are two or more tenants living together on a joint tenancy they will be jointly and severally liable for council tax. The tenancy agreement should make it clear where liability lays.
Landlords should notify the local council of the name of the tenant(s) and when he/she moved in. Certain tenants may qualify for exemptions or discounts because of their circumstances but they will have to notify the council of their status. When the tenancy comes to an end the liability for council tax will revert to the landlord until a new tenant is found.
In a House in Multiple Occupation containing bedsits or where tenants are paying rent for individual rooms on individual tenancy agreements, the landlord is liable to pay Council Tax. Rent should be set to take account of the amount the landlord must pay for council tax. If the council tax increases, this does not create an automatic right to increase the rent.
Rents cannot usually be increased more frequently than once a year. A landlord can include a term allowing increase of council tax element in line with council tax rise in the tenancy agreement.
In a House in Multiple Occupation where the tenants are renting the house on a joint tenancy as a group they will be liable to pay the council tax unless there is a clause in the tenancy agreement to say otherwise.
In England from April 2013, each Local Authority has implemented their own local Council Tax Support scheme. In many Local Authorities this has included removing the short-term empty discount as well as the major repairs and structural alterations discount. Councils may look at charging landlords for every day when a property is deemed to be empty. Sometimes this does appear overzealous as they are charging for only one day or even a part of a day.
Therefore, where there is to be no gap between tenancies, landlords can be specific on the date and time that a tenancy ends, and when a new one starts, for example within letters. Therefore if a tenancy ends on the 1st September it can be made clear that the tenancy ends at a specific time e.g. at 23.59, and that a new tenancy starts at 00.00 on the 2nd September. This will prevent the council from levelling a charge for an empty property. This will allow a landlord to demonstrate to the local authority that they are not liable for council tax.
Council tax exemptions
Council tax is payable on properties whether or not they are occupied. However, certain types of vacant property are exempt from liability.
| Main categories of exemption for empty private rented properties: | |
| Substantially unfurnished and recently undergone major repairs or alterations to make it habitable | Exemption for up to six months ** |
| Substantially unfurnished | Exemption for up to six months ** |
| Property occupied entirely by tenants under 18 | Exemption as long as the tenants all remain under 18 and rent the property |
| Property which is occupied entirely by students or school/college leavers (but the students must apply for this exemption) | Exemption as long as the tenants continue to be students and rent the property |
** The Council Tax (Exempt Dwellings) Order 1992 was amended from 1 April 2013 which resulted in these categories no longer being exempt.
Similarly, from 1 April 2013, the Local Government Finance Act 1992 (as amended by the 2003 regulations) was further amended and resulted “second homes” discounts being removed.
Where a tenancy is still in force but the tenant is mainly resident elsewhere for certain reasons, the empty property is exempt from council tax liability.
| Other exemptions for empty property where tenant is absent |
| The property will be exempt so long as the tenant is: |
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If the tenant is only living away for these reasons for a short time they remain liable to pay council tax on the property.
If the tenant has died and their executor is liable for the rent the dwelling becomes exempt from council tax until six months after probate is granted (so long as the tenancy remains in force).
Note: It is important to enquire with the local authority who has jurisdiction over the property(ies) concerned as they may be exercising their discretionary powers to amend these exemptions and discounts.
Council Tax Discounts
In certain situations the property will be subject to council tax but the liable person will only have to pay a discounted rate.
An empty property that is not exempt from council tax will attract a reduction of up to 50% but local authorities may cut that to a lower discount in order to deter people from leaving properties empty.
Where an empty property has been exempt from council tax and that exemption comes to an end the property will be liable for council tax at the discounted rate if it is still empty.
NOTE: The Council Tax (Exempt Dwellings) Order 1992 was amended from 1 April 2013 which resulted in these categories no longer being exempt.
Similarly, from 1 April 2013, the Local Government Finance Act 1992 (as amended by the 2003 regulations) was further amended and resulted “second homes” discounts being removed.
A single resident will have a reduction of 25% in their council tax bill. Sometimes there may be more than one person living in the property but a single person discount will still apply.
If any of the residents are under 18 or are only visiting or staying in the property temporarily they are ignored for council tax purposes. So a single parent with two children will count as a single resident.
In addition, certain other people are disregarded when calculating whether a single person council tax discount applies:
- Anyone aged under 18 for whom child benefit is payable
- Full-time students at a college or university
- Students under 20 studying to A-level, Scottish Highers or equivalent
- Recent school and college leavers under 20
- Foreign language assistants
- Student nurses
- Anyone with diplomatic, Commonwealth or consular privilege
- Foreign spouses or dependants of students
- Apprentices
- National Traineeship trainees
- People in detention or in prison
- People with severe mental impairments
- Carers
- Tenants who are long-term hospital patients
So if there is a group of people resident in the property and all but one fall into any of these categories the one remaining resident will receive the single person discount.
If a property is occupied entirely by students it is exempt from council tax altogether (see the section on ‘Exemptions from council tax’). If it is occupied by a mixture of students and other adults then the students will be disregarded when calculating the number of residents.
Note: It is important to enquire with the local authority who has jurisdiction over the property(ies) concerned as they may be exercising their discretionary powers to amend these exemptions and discounts.
