What UK Landlords Need to Know About Council Tax on Unoccupied Homes After One Year

Understanding Council Tax Rules for Empty Properties

As a landlord in the UK, it’s important to understand the council tax implications of leaving a property unoccupied for an extended period. After a home has been empty for one year, special council tax rules apply that landlords need to be aware of.

In general, councils have the power to charge up to 100% extra council tax on homes left empty for 2 years or more. Some councils have even stricter rules and can charge this premium after just 1 year. The goal is to incentivize owners to bring long-term empty homes back into use.

However, there are some exemptions and discounts available in certain circumstances, which we’ll cover in more detail below. The bottom line is that UK landlords should carefully manage vacancies and understand their council tax obligations to avoid being hit with hefty premiums.

Council Tax Exemptions for Unoccupied Homes

While most empty homes will be subject to full council tax after a certain point, there are some situations where a property can remain exempt, such as:

• Homes empty due to the owner or tenant passing away (exempt for up to 6 months after probate)
• Homes left empty by someone who has moved into a hospital, care home, or elsewhere to receive personal care
• Homes left empty by someone who is in prison
• Homes that are unable to be let separately because they are linked to or accessed through another property
• Homes that are empty due to action taken by the Crown or local authority (e.g. compulsory purchase)

If one of these exemptions applies to your unoccupied property, you will not have to pay any council tax on it, even after a year. Make sure to notify your local authority of the situation.

Discounts for Unoccupied Homes

In addition to the exemptions above, there are also some situations where a discount on the council tax may apply for an unoccupied home:

• Homes undergoing major repair work or structural alteration (100% discount for up to 12 months)
• Homes that are unoccupied and unfurnished (100% discount for up to 1 month, then full council tax applies)
• Homes that are unoccupied and furnished (known as “second homes” – no discount, but council tax capped at 100% even after empty for a year)

So in summary, a completely unfurnished home gets a 1 month “grace period” of no council tax, while a furnished unoccupied home will be charged the standard council tax rate from the first day it is empty. Only homes undergoing major renovations can remain exempt for up to a year.

Strategies for Avoiding or Minimizing Empty Property Premiums

As a landlord, what steps can you take to avoid or minimize paying extra council tax on an unoccupied property? Here are a few strategies to consider:

1. Try to avoid extended vacancies between tenancies. Aim to line up a new tenant as soon as possible after one moves out. Consider offering incentives for longer-term leases.
2. If faced with an unavoidable vacancy, weigh the cost of leaving the home furnished vs. unfurnished. An unfurnished home will qualify for a 1-month exemption.
3. For properties needing extensive renovations that will take several months, it may be worth fully gutting the property to qualify for the 12-month “major works” exemption.
4. Look into whether your property could qualify as a “job-related dwelling” – one that is owned by an employer and kept available for employees. These are exempt from empty property premiums.
5. Consider selling or renting out a long-term vacant property that is no longer needed, rather than continuing to pay 200% council tax on it indefinitely.

The key is to have a plan to keep vacancies as short as possible or to meet the requirements for an exemption if an extended empty period is unavoidable. With some careful management, landlords can minimize or avoid empty property premiums.

Case Study: How One Landlord Saved on Council Tax

To illustrate these concepts, let’s look at a case study of a landlord who took smart steps to reduce council tax on an empty property:

Sarah owns a rental flat in London. Her long-term tenant moved out and she knew it would take about 2 months to find a new occupant. Rather than pay the full council tax for 2 months, Sarah decided to fully clear out the flat and leave it unfurnished. This qualified the flat for a 1-month exemption.

Then, Sarah discovered the flat needed more extensive work than she thought. She ended up fully renovating the kitchen and bathroom, replacing the flooring, and rewiring parts of the flat. The work ended up taking 10 months in total.

Because the property was undergoing major renovations, it qualified for a further 12-month exemption from council tax. So in the end, Sarah didn’t have to pay any council tax for the entire 13 months the flat was empty, despite it being a long vacancy. By utilizing the exemptions available, she saved over £2000 in council tax.

Of course, not every situation will qualify for an extended exemption like this. But it shows how understanding the rules and taking action to meet exemption criteria where possible can make a big financial difference.

How Councils Identify Long-Term Empty Homes

You may be wondering – how do local authorities know if a property has been empty for over a year, and how do they enforce the empty property premiums? Here are a few ways councils identify vacant homes:

• Reports from neighbors, local residents, and councilors
• Comparison of various council databases (housing, electoral roll, tax, etc.)
• Physical property inspections by council officers
• Landlord licensing schemes and self-reporting requirements
• Cross-referencing with utility companies to check for inactive accounts

Once a long-term empty home is identified, the council will attempt to contact the owner to verify the situation and collect the premium if applicable. In some cases, the council can even take possession of a property that has been vacant for an extended period under an Empty Dwelling Management Order (EDMO).

So while there may be some homes that slip through the cracks, councils are becoming increasingly proactive and sophisticated at finding and monitoring long-term empty properties. Landlords should assume the council will catch on sooner or later and plan accordingly.

Considerations for Accidental or Intentional Vacancies

What happens if your rental property accidentally becomes vacant for an extended period, perhaps due to unforeseen circumstances like a sudden tenant departure or problems finding a new tenant? In these cases, you likely won’t face any penalties besides the standard loss of rental income and the extra council tax premium after 1-2 years.

However, if the council believes a property was intentionally left vacant to avoid paying council tax, they may impose penalties or even pursue legal action for council tax evasion. For example, claiming a property is a “second home” and leaving it furnished and vacant long-term could be seen as council tax avoidance.

The key is to document the situation if a property becomes unexpectedly vacant, and continue to make good faith efforts to re-let it. If the council inquires, you’ll be able to show it was an unintentional vacancy.

On the flip side, landlords should be extremely cautious about intentionally leaving a property vacant as a tax avoidance strategy. The risks and potential penalties are high, and it’s simply not worth it. Focus on keeping your properties legally rented and occupied where possible.

Re-occupying an Empty Property

If you have a rental property that has been vacant for an extended time, it’s important to notify the council as soon as it becomes occupied again. You don’t want to continue being charged the empty property premium after you have a tenant moved in.

Typically, you’ll need to provide the council with the name of the new occupant and the date their tenancy began. The council will then adjust the council tax account and charge the standard occupied rate going forward.

In some cases, you may need to provide additional evidence that the property is now genuinely occupied, such as:

• A copy of the tenancy agreement
• Copies of utility bills in the tenant’s name
• Proof of rent payments received

The council wants to ensure that the property is truly occupied and not just being staged to look occupied to avoid council tax. As long as you have a legitimate tenancy in place, you shouldn’t have any problem getting the empty property premium removed.

Selling an Empty Rental Property

If you’ve decided it’s time to sell a rental property that has been sitting vacant, there are a few council tax implications to keep in mind:

• You will be responsible for any empty property premiums until the date of sale, even if you are actively marketing the property.
• The new owner will become responsible for council tax as soon as they complete the purchase, even if they don’t occupy the property right away.
• If selling to another landlord who will keep the property as a rental, it’s a good idea to share information about the property’s vacancy history and any exemptions that may transfer to the new owner.
• If selling to an owner-occupier, the empty property premium clock typically resets and the new owner would have at least a year before facing any premiums, even if the property remains vacant after purchase.

Basically, council tax liability transfers with ownership, but any previous empty period stays with the property (unless it becomes owner-occupied). Keep this in mind as you negotiate prices and terms with potential buyers.

Takeaways and Tips for Landlords

We’ve covered a lot of ground in this guide to council tax on unoccupied homes. Here are the key takeaways and tips for UK landlords:

• Understand the council tax rules and exemptions for empty properties in your area. Rules vary by council.
• Try to minimize vacancies between tenancies where possible. Consider incentives for longer leases.
• Take advantage of empty property exemptions and discounts if you have an unavoidable long vacancy.
• Make sure to notify the council as soon as a vacant property becomes re-occupied.
• Document situations where a property becomes accidentally vacant for an extended time.
• Focus on legitimate tenancies rather than risky council tax avoidance schemes involving intentional vacancies.
• Factor in empty property premiums when buying or selling a rental property.

By being proactive and educated about the council tax implications of empty rental homes, you can minimize your tax liability and maximize your returns as a landlord. Remember, the goal is to keep your properties legally occupied and generating rental income where possible.

Frequently Asked Questions

Q: How much extra council tax do you pay on an empty home?
A: It varies by council, but many charge 100% extra (i.e. double) after a property has been empty for 2 years. Some councils charge this premium after just 1 year.

Q: What qualifies as a “long-term empty property” for council tax purposes?
A: This is typically defined as a property that has been unoccupied and unfurnished for at least 1-2 years, depending on the council. Furnished properties are considered “second homes” and don’t count as empty.

Q: How can I avoid paying council tax on an empty property?
A: Look into whether the property qualifies for any of the exemptions, such as major renovations or occupant in care. If not, the best solution is to re-occupy the property where possible.

Q: Is it legal to intentionally keep a property vacant to avoid council tax?
A: No, this would likely be considered council tax evasion and can result in penalties or legal action. Always focus on legitimate occupation where possible.

Q: What happens if I don’t tell the council my property has become occupied again?
A: You will continue to be charged the empty property premium until you notify the council of re-occupation. You may also face penalties for failing to provide accurate information.

Q: Can I appeal an empty property premium on my council tax bill?
A: You can appeal if you believe the premium has been applied in error, e.g. the property was actually exempt or occupied. However, there is no right of appeal simply because you disagree with the policy.

Hopefully this guide has given you a comprehensive overview of how council tax works for empty rental properties in the UK. By understanding the rules and taking smart steps to keep your properties occupied, you can minimize your council tax liability and maximize your success as a landlord.