Most automatic 50% Council Tax discounts on empty properties and second homes will come to an end on Monday, which will cause as much as a 200% increase in bills for over a million home owners, including many landlords. Councils are not obliged to increase taxes on empty properties and second homes, but according to the Institute of Revenues, Ratings and Valuation (IRRV), there is reason to suspect that most of them will do so.
David Magor, chief executive of the IRRV, said, “The government is trying to get a greater yield from council tax to keep the overall level down. And it is trying to encourage the occupation of empty homes.
“But sitting behind this is the funding of the council tax reduction scheme. Councils have had to adopt these provisions to find the money to finance those schemes.”
Here are the changes that are to take place:
- Both exemption class C (properties that are empty and unfurnished for up to six months) and exemption class A (properties requiring or undergoing major repairs for up to 12 months) are to be abolished. It will be up to each council to decide whether to award a local discount in place of either.
- Properties that are empty and without furniture are currently exempt for 6 months and then get a 50% discount. But from Monday councils will be able to charge the full amount on properties that have been empty and unfurnished for two years or more.
- The minimum discount that councils can give for second homes and unoccupied furnished lets will be reduced from 10% to 0%.
The council tax reduction scheme for low-income families requires more than £400m to fund. There are over 700,000 empty properties and a quarter-of-a-million second homes that have been seen as an easy source of revenue. This is going to burn a hole in a lot of back-pockets.
Landlords may well find their costs going up. Presently, they get six months free of council tax between lettings of unfurnished property. But that will soon end.
Adrian Thompson, director of the Guild of Residential Landlords, foresees an increase in rents as a result. He said, “I can see no choice in the matter, Returns are very low anyway. I can’t see any choice.”
Local councils are going to vary in their approach. Some will be charging full council tax from day one, while others aim to ease the changes in gradually. But as Adrian Thompson points out, different councils making different decisions does not help the situation for landlords and letting agents. He said, “Harrogate are giving one week instead of six months. But Sedgefield is three months. And Leeds 20 miles away is zero, not even a day. It’s a nightmare. “
Communities Minister Baroness Hanham spoke in favour of the changes, saying, “Localisation will give local authorities the flexibility to design council tax support schemes for working age claimants in their area. Many are delivering savings using their local flexibilities and discretion.”
These changes mean that the local authority will have to be notified promptly of vacant periods. This could mean that the agent has to make the council aware of an empty rental property on the day tenants move out, no matter how short the property is to remain vacant.
Although there is some concern that landlords will have to raise rents to meet their rising costs, it may also be true that landlords may be more willing to lower rents in order to usher in tenants more quickly now that the cost of vacant periods has blown up.
Letting agents too may find problems when a tenant who has given two months’ notice to leave decides to quit before the end of the tenancy. Most tenants would carry on paying rent to the end of their official tenancy or until the property is re-let, but are let off council tax. From April 1, someone is going to have to pay that bill. At this moment, it is uncertain what the legality is of making the tenant liable to foot the bill.
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