What is Council Tax?

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Council Tax is a tax collected by the local council to pay for important services in the community, like garbage disposal and street upkeep. It is an annual charge typically issued in April, with the option to spread the payments over ten months. You must pay council tax if you're 18 or older and have a home. 

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The amount you owe depends on how many adults live with you. A liable adult refers to an individual responsible for paying council tax. However, there are exceptions to this rule. For example, university students or individuals with severe mental impairments may be exempt from being considered liable adults.

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The full council tax amount applies when two or more liable adults are in a household. Conversely, households with only one liable adult are eligible for a 25% discount on their council tax bill. Furthermore, households with no liable adults, such as those occupied solely by full-time students, receive a 50% discount on their council tax charges.

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Increase in Second Home Council Tax Bill Starting from 2023

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From 2023 onward, second homeowners in England may face higher council tax bills due to the government's implementation of the Levelling Up and Regeneration Bill. Under this bill, local councils can charge double the council tax on furnished homes not utilized as the owner's primary residence. As a result, many second homeowners could see their annual council tax payments increase by thousands of pounds.

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For the proposed premium to take effect in April 2024, the Bill must receive Royal Assent by 1 April 2023. While most second homeowners may not welcome this measure, it has gained popularity among the general public. According to a YouGov poll conducted in February 2023, approximately 59% of respondents supported doubling the council tax rate on second homes.

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In Wales, changes to the second home council tax occurred in April 2023. The maximum level at which local authorities can impose council tax premiums on second homes and long-term vacant properties will increase to 300%, up from the previous maximum of 100%. Consequently, second homeowners in Wales could face significant increases in their annual council tax expenses.

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Local councils in Wales have the flexibility to set the premium at any level within the maximum limit. They also have the option to apply different premiums to second homes and long-term vacant dwellings. However, it's important to note that certain properties, such as short-term and mid term lets, may be exempt from these changes to second home council tax regulations.

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How to Avoid Second Home Council Tax

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Many individuals wonder if it's possible to avoid paying council tax on their second homes. In England, some second homeowners have employed the tactic of registering their properties as businesses and renting them out through agents or platforms like Airbnb. By doing so, they aimed to bypass council tax entirely and instead benefit from small business rates relief.

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However, recent developments have led to a tightening of these regulations. In the past, a simple declaration of intention to rent out a property as a holiday let could be sufficient to avoid council tax. Yet, the criteria for accessing small business rates relief have become increasingly stringent in recent years.

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England: Updated Criteria for Business Rates Valuation

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Until 31 March 2023, a property in England qualifies for business rates valuation as a self-catering property if it is available for short-term rentals for at least 140 days annually. However, starting from 1 April 2023, in addition to meeting the 140-day availability threshold over the current and previous tax years, the property must have been actually let for at least 70 days within the last 12 months to be eligible for business rates valuation.

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Wales: Revised Conditions for Business Rates Assessment

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Until 31 March 2023, holiday lets in Wales are considered self-catering properties for business rates purposes if they are available for short-term lets for at least 140 days per year and actually let for a minimum of 70 days annually. However, as of 1 April 2023, the revised requirements state that the property must be available for short-term lets for at least 252 days in total over the current and previous tax years. Moreover, it must have been actually let for at least 182 days within the last 12 months to qualify for business rates valuation.

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Scotland: Consult the Local Assessor

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If a property is available for short term lets Scotland for 140 days or more annually and has been let for a minimum of 70 days during a financial year.

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Responsibility for Paying Council Tax in Buy to Let Properties

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When you own a property and rent it out to a single household, the tenants are typically responsible for paying the council tax. However, there are instances where the property owner assumes the responsibility for council tax payments. This occurs, for example, when the property is let as a House in Multiple Occupation (HMO), where individual rooms are rented out separately.

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If you're considering investing in a Buy to Let property, it's essential to consider additional costs beyond council tax. These may include higher stamp duty rates if you already own a property and potential capital gains tax allowance upon sale. For a comprehensive understanding of the costs and responsibilities associated with being a landlord, we recommend reading our guide on Buy to Let mortgages.

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How Can You Challenge Council Tax Bill?

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Challenging your council tax bill is possible if you believe your home is in the wrong council tax band. Successfully challenging the band can result in a reduction in your council tax bills. However, it is important to approach this process cautiously, as an incorrect challenge could potentially increase your property's band, resulting in higher council tax payments.

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While seeking ways to reduce your bills, exploring opportunities for savings on your most significant monthly expense is also essential: your mortgage. Consider remortgaging onto a more affordable deal to lower your mortgage payments. 

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Simplify Your Rental Property Management with Houst

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Houst can help you manage your property and increase your profit, whether you want to list your property for Airbnb long term lets or for Airbnb short term rental. Our comprehensive services cover all the essential aspects, from tenant sourcing and screening to maintenance and guest communication. Our team uses the latest technology and their experience to make sure property owners and guests have a smooth experience.  By entrusting your property to Houst, you can enjoy peace of mind, increased occupancy rates, and optimised rental income. Let us handle your holiday let management while you focus on reaping the rewards of your investment property.

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