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Early December saw a new key piece of legislation introduced to change how Council Tax is paid on HMOs. Below, we examine what the legislation means for landlords and feature industry comments from iHowz’s Peter Littlewood.

The government rolled out a key piece of new legislation in November 2023, officially coming into play on the 1st of December. This legislation directly impacts HMO landlords, and with the tight turnaround time, property investors had minimal opportunity to understand the changes fully.

Here, we examine the new legislation and discuss what the changes mean for landlords, with comments from iHowz co-founder, Peter Littlewood.

The Key Changes to HMO Council Tax Regulations

The new legislation was introduced to simplify who pays council tax on HMO properties. Unfortunately, on your initial read, you may find it’s more complicated than before.

Disaggregation of HMO properties

Some councils had split up, or disaggregated, council tax in HMO properties so that individual rooms were banded, with each room/tenant on a separate contract. This new legislation orders those councils to re-aggregate, and as such, council tax is now only liable on the property as a whole, as opposed to the rooms/units.

When a single property contains both self-contained units and room lets, complications will likely arise.

Council Tax Responsibility

Furthermore, as well as banding all HMOs as a single dwelling, the new legislation sets out to make the property ‘owners’ responsible for all HMO council tax.

However, the definition of ‘owner’ here means it’s not as straightforward as the landlord being liable for the council tax. The ‘owner’ includes any individuals with a material interest in the dwelling, meaning tenants with tenancy agreements of at least six months fall into this category.

To summarise, where an HMO is let to all tenants on a single tenancy agreement, the tenants are liable for the council tax (for leases of six months or more), and on a room-by-room basis, the landlord is responsible for the council tax. Remember, though, that this can be incorporated into the rents you charge your tenants. 

What this means for HMO landlords

The government has already issued notifications to all councils regarding the recent changes. Despite asserting that ‘council tax liability rests with the landlords of HMOs covered by the regulations’, the contradictions and definitions in this new legislation mean it’s not necessarily the case for you.

Peter Littlewood, the co-founder of landlord association iHowz, comments:

“The proposed changes to HMO Council Tax show the dangers of law being drafted by someone unaware of the interaction with existing laws, leading to unintended consequences.

Although all Councils were advised that from 1st December 2023, all landlords/owners would be responsible for the Council Tax on all HMOs, iHowz are firmly of the opinion that the situation is unaltered. 

Because of other laws already in place, where an HMO is let on a room-by-room basis, the landlord is responsible, but where it is let to any number of people on one agreement, the tenants are liable.

iHowz are writing to all Councils in England to advise them of this opinion.”

For a full explanation and analysis of this new legislation, visit iHowz’s website here, where you will find a thorough breakdown with David D’Orton Gibson, from Training for Professionals. Furthermore, you can also watch an exclusive member’s workshop on HMOs and Council Tax featuring MFB Sales Director Jeni Browne.

Watch the video here.

Considering investing in an HMO? You may also find our article What is an HMO and How Do You Finance One? a useful read. 

Get in touch

If you have any questions on how the new HMO legislation will impact your property investments or to discuss your property finance plans, contact our brokers on 0345 345 6788 or submit an enquiry here.

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