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Is Council Tax Included In Your Rent?

16 Nov 2020

First-time tenants usually have the same question, "Is council tax included in your rent?". This is perfectly sensible given the amount is not small and handling it is always a hassle

When you check out a rental property, it is crucial to make sure you can afford all the payments and bills that come with it. They are not just the monthly rent, but also other expenses like utilities and council tax1 agreement the first time. Is council tax included in your rent? Who has to pay for it?

Most tenancy agreements have a section stating that the tenants are responsible for paying council tax, which can amount to a large amount of money if you're renting a highly-valued property. Continue reading to learn more about the council tax, particularly in the renting context and make sure that everything is within budget.

  1. Council Tax
  2. Who Will Cover Council Tax? Is Council Tax Included In Your Rent?
  3. Is There Any Exemption?
  4. Does Build To Rent Offer Any Discount On Council Tax?
  5. Closing Thoughts

1. Council Tax

What is council tax? What is it for?

Council tax is a tax on domestic property that local authorities collect in England, Wales and Scotland. It was put into effect with the introduction of the Local Government Finance Act 19922, replacing the Community Charge and domestic rates that existed before. There is no council tax in Northern Ireland, where domestic rates are employed for this purpose3.

When you pay council tax bills, you send the payments directly to your local council (hence the name), who then use the sum to finance social services in your community, including:

  • Police
  • Transportation services, such as road maintenance and street cleaning and lighting
  • Trading standards
  • Rubbish collection and disposal
  • Education services, such as libraries
  • Recreational projects like sports centres and upkeeping parks
  • Fire and rescue services
  • Other administration tasks, such as local elections and record-keeping

tax

The most notable exception that council tax does not cover is health services. Local councils bear the responsibility for the collection of this tax. They will send council tax bills to households within their jurisdiction, indicating how much each household must pay for that year and when they must make the payments.

Council tax is typically split into 10 monthly payments, followed by 2 months of no payments. If you have any trouble paying, consider contacting your local authority to extend your tax payment for 12 months instead4.

How is council tax determined?

As a progressive property tax, the council tax of each household is mainly determined by the value of their property, which in turn is put into different "bands". For example, there are eight bands in total in England, starting with Band A (properties with values of up to £40,000, based on April 1991 values) and ending with H (above £320,000).

The rule is, the higher in value your property is, the higher the amount of tax your local council can charge you.

tax rules

2. Who Will Cover Council Tax? Is Council Tax Included In Your Rent?

Suppose you are 18 or above and you own a home in England, Scotland, or Wales5; according to Section 6 of the Local Government Finance Act 1992, you must pay council tax.

If you live with your partner or spouse, two of you are jointly responsible. You don't have to pay any council tax until you receive a bill issued with your name or your partner's name on it. This bill is an official notice for taxpayers from the local authority.

Everything is fairly straightforward when you live in a property you own, but the question will become trickier when it is a rental property. While occupants are usually the one that must make sure the council tax bill is fully paid in time, there are also circumstances when this is not the case.

When the tenant is responsible for council tax

If the tenants rent the whole property on their own or in a joint contract with their friends or family, whose signatures are on a single rental agreement, it's their collective responsibility to pay the council tax on that property. Most landlords don't include this in the monthly rent, and the local council will send the bill directly to the occupants in the property.

signing a contract

When the landlord is responsible for council tax

When the rental property is categorized as a house in multiple occupations (HMO)6, the landlord is responsible for paying the council tax bills. HMO includes apartments or houses shared by more than one household with different tenancy contracts.

The landlord is also liable for council tax if:

  • The property is vacant meaning no one is living there as their only or main residence.
  • All the tenants living there are under 18.
  • The property is a nursing or residential care home.
  • The property belongs to a religious community.
  • It is a home of the ministers of religion.
  • The property accommodates asylum seekers.

Check your tenancy agreement

Most landlords do not include this payment in the rent. You must ensure that the monthly installment goes directly to your local council in a timely manner. Some, however, still choose to include it in the rent payments for occupants and pay the tax to the local council bills themselves.

When you are interested in a rental property, ask landlords the landlord about the council tax. If you are still uncertain about it later during the tenancy, do not hesitate to check your lease terms to make sure everything is sorted out properly.

a blonde woman is checking paper

3. Is There Any Exemption

A lot of dwellings are entitled to an exemption from council tax liability. To make things easier for landlords and occupants when they apply for one of those exemptions, they are organised into various classes7. Most of them are only applicable when the property is unoccupied, such as:

Class B: when the unoccupied house or apartment is leased or owned by a charity and used for the charitable purposes, it can apply for an exemption from council tax liability for up to six months.

Class D: when the liable person for the council tax is in detention in a prison, a hospital or elsewhere, an exemption is applicable. The property has to be completely unoccupied and has been their main or sole residence.

Class E: applies to empty properties that previously have been occupied by a person now living in a care home or hospital. The property must have been the main or sole residence of the absentee.

Class F: when the owner or sole tenant of a property dies, and it becomes unoccupied as a result. In this case, no one has to pay the council tax on that property until it is occupied again or the probate process is complete.

Class G: this class of exemption can be used when the occupation of an unoccupied property is prohibited by law, such as via a demolition order, a compulsory purchase order or a closing order. It does not apply when there are squatters who live there illegally.

Class H: landlords do not have to pay any council tax if their empty property is held available for a minister of religion so he or she can carry out the duties of the office.

Class I: applies when the main or sole occupant of an unoccupied house or apartment must reside in another place to receive personal care because of mental disorder, illness, disablement or old age. This includes a mental health residential facility, a nursing home and other registered care homes.

There are other common exemptions and discounts for council tax, which you can consult with your local authority or check the official website of your local council. For example, students are often fully exempt while single occupants can get a 25% reduction.

young married couple looking through tenancy agree

4. Does Build To Rent Offer Any Discount On Council Tax?

With a busy lifestyle of the 21st century, more and more people want to have a more streamlined and transparent way to handle all the payments they have to pay each month. Managing agents and rogue landlords sometimes take advantage of tenants and place various hidden costs in the lease agreement that you can hardly notice at first. This is one of the reasons private renting has such a bad reputation, especially when the tenants cannot do anything after signing the tenancy agreement.

Thanks to the growth of other forms of properties like Build To Rent, this problem may arise less often8. Owners and investors of such projects have adopted an array of new benefits for tenants.

Many Build To Rent developments have started to waive security deposit and included utility bills and council tax in the monthly rental fee9. Since each Build To Rent development usually has a single landlord for all tenancies, they will bear the responsibility to take care of the council tax liability for the entire property.

This benefit is the icing on the cake and makes Build To Rent even more of an attractive option in the UK when this no-frills scheme is already on the rise and seeing a lot of development.

real estate agent showing prospective buyers

5. Closing Thoughts

Council tax is one of the payments you must be aware of when renting a house or apartment. If you are entering a tenancy but still unsure who is responsible for making the monthly payment for this tax, you are simply asking for trouble.

Is council tax included in your rent? The only way to find out is to ask your landlord or read the tenancy agreement. If you find this too big of a hassle, consider new forms of renting like Built To Rent, which has employed plenty of initiatives to lift many burdens from tenants' shoulders, including council tax bills.