En-Suite Council Tax…
There’s been talk of en-suites being banded separately for council tax for some time, and the general consensus is that IF it ever happens, rents will have to rise to accommodate it. Most say that some of the extra cost will be covered by the tenants and some by the Landlords/Rent 2 Rent’ers … but it’s never going to be black and white.
Normally, when letting a house, the TENANT is responsible for the council tax. If you let your HMO by the room, then you the LANDLORD are responsible. But if you let your HMO out by the room, and each room has its own Council Tax banding, then each room is classed as a ‘dwelling’ and the TENANT again becomes responsible. If you are a Rent 2 Rent’er, you are technically the Landlords TENANT, and so will become liable for the tax. Although, depending what you read, HMRC seem a little uncertain on this point. There’s been much talk of adding a clause to all ASTs, making it clear that should the rooms be individually taxed, the TENANT will become liable.
Notifying The Council
Some say that adding this line to the AST will make it easier to recover any monies if your terms say TENANTS must reimburse you; either by deposit deduction or a civil action. ‘If’ this tax comes in your area, it will be important to immediately notify the council whenever a tenant moves on or scarpers. Remember also that YOU may be liable for council tax, even if you are experiencing a void… or two! This is another reason to squish those voids.
We did a quick bit of research and found a variation of £878 across council tax Band Bs in different areas, so make sure and do your due diligence when researching your area.
But shrugging your shoulders and saying ‘I’ll just charge the tenant’ may not be so simple, as this may raise your rents above other non en-suite rooms in the area. When push comes to shove, your customers may prefer the cheaper option, which may in turn result in rooms taking longer to fill, so this needs to be carefully thought out.
There have also been grumbling sounds from a minority, warning that Governments may eventually bring forth ‘Rent-caps’, which would prevent landlords trying to recoup money by raising the rents. The Government seem to see all property investors as gold-toothed millionaires, lighting cigars with £20 notes in the back of their chauffeur driven Bentleys!
There have to date been a number of cases when a landlord has refused to pay this additional tax, fought their local council in court and won! So this is far from conclusive.
There was a also court case on the 26th May 2016 between Leeds City Council (the claimant) and Stephen Broadley (the defendant), where the council claimed the defendant owed them unpaid council tax. The Guild of Residential Landlords wrote an article on the case entitled ‘How To Ensure Your Tenant Is Liable For Council Tax At The End Of Term’. You can read it here.
As Charles Darwin said, it’s not the strongest or the most intelligent who survive, it the ones most able to adapt. We say: If there’s one certainty in life, it’s that EVERYTHING will eventually CHANGE. Imagine how investors and landlords felt when planning rules were first introduced. Imagine (or remember) what it was like when licensing rules were first introduced. There will ALWAYS be young professionals looking for rooms and there will ALWAYS be landlords, agents and Rent 2 Renters wanting to supply those rooms. So this is just another change that we need to absorb and adapt to. After the dust has settled, the serious investors will carry on and the others will go back to the day job… and 99% of the population will be working for the 1% who never gave up!
PS: You can find your individual council tax bands here
Here are the National bands.
Band A: Up to £40,000 (1991 price)
Band B: £40,000 – £52,000 (1991 price)
Band C: £52,000 – £68,000 (1991 price)
Band D: £68,000 – £88,000 (1991 price)
Band E: £88,000 – £120,000 (1991 price)
Band F: £120,000 – £160,000 (1991 price)
Band G: £160,000 – £320,000 (1991 price)
Band H: More than £320,000 (1991 price)
Check out some more great articles from Francis and Emily at www.multiletcashflowsystem.com/blog