October 31

HMO Council Tax Reforms: The Reality for Landlords


The rising popularity of serviced apartments attracts guests seeking hotel-like comforts while maintaining their privacy. To stand out among the competition and increase profitability, it’s crucial to enhance your marketing strategies for your multiple properties in town.

The recent announcement regarding changes in council tax regulations for Houses in Multiple Occupation (HMO), which surfaced just before the weekend, may not offer the anticipated advantages upon closer examination. This perspective is presented by a legal expert who posits that the alterations may not uniformly benefit all categories of HMOs, potentially leaving some landlords with lingering financial concerns.

It’s essential to delve into the intricacies of these changes to comprehend their implications fully. The Valuation Office Agency is currently in the process of systematically reassessing the entire HMO market. Their approach involves evaluating each room within an HMO as an autonomous unit for council tax purposes. Following this assessment, individual bands are assigned to these rooms, leading to a consequential shift of responsibility for band A council tax onto the tenant.

These adjustments in the tax structure undoubtedly raise questions about their potential impact on landlords and the wide spectrum of HMOs in the market. In light of this, a comprehensive understanding of the nuances surrounding this issue is necessary for landlords to navigate the evolving landscape of HMO taxation effectively.

In practical terms, this new policy mandates that each tenant residing in a House in Multiple Occupation (HMO) is individually liable for their council tax bill. This significant shift from the previous arrangement, where tenants collectively shared a combined monthly payment covering council tax, utilities, heating, and rent, has financial implications. The days of enjoying the simplicity of one monthly fee for all these essentials are now a thing of the past for HMO tenants.

The government’s stated objective behind this change is to introduce a more consistent and predictable approach to council tax assessment for HMOs. Under this system, HMOs would be considered as a single property, resulting in the assignment of a unified council tax band. The potential financial benefit for tenants is not insignificant. The new approach could potentially lead to annual savings of up to £1,000 for individuals residing in shared accommodations.


However, while the government’s intentions may appear to offer a favorable outcome for tenants, a legal expert has voiced reservations regarding the precise wording and implementation of this initiative. These concerns cast a shadow of uncertainty over the fate of hundreds of thousands of tenants, raising questions about the practical implications and potential pitfalls of the new policy.

Phil Turtle, the compliance director at Landlord Licensing & Defence, shares his insights: “At first glance, this development appears to bring positive news for both HMO tenants and landlords, particularly those with shared-facility HMOs defined under Section 254(2) of the Housing Act. It suggests a more straightforward and unified approach to council tax, potentially reducing administrative complexities.

However, a different scenario unfolds for Section 257 converted building HMOs, which closely resemble conventional flats. In such cases, the implications of these changes align with expectations, given the nature of the housing arrangements.

Yet, what appears to have escaped broader attention is the considerable impact on the many tens of thousands of Section 254(4) HMOs. These accommodations are designed to cater to market demands, offering bedsits with kitchenettes and en-suite facilities. This configuration aligns with tenant preferences and expectations for modern housing. However, the challenge arises when one or more bedsits within the same building feature private essential facilities located outside their individual doors. The implications for these Section 254(4) HMOs remain unclear, and the specific nuances of this scenario may need further exploration to ensure a fair and effective implementation of the new regulations.”

“For example, the bedsit may contain a kitchenette, but the tenant has to exit the bedsit and trot down the corridor—and in old Victorian properties, down three or four steps—to the rear half-landing, to his or her private bathroom.

“Or they may have an en-suite in their room, but their private kitchen, which probably used to be the communal kitchen before the larger rooms were upgraded to have kitchenettes, is across, or along, the corridor to what has now been allocated to that tenant as their private kitchen—one that is not shared with anyone else.

“It is essential that it is made clear in the legislation that ALL Section 254 HMOs, including Section 254(4), are treated as single houses for council tax; otherwise, the apparent win will be somewhat hollow for hundreds of thousands of tenants still forced to pay individual council tax bills.”


Read more Property Investing News HERE


Council Tax Changes, HMO Council Tax, HMO UK

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