The government plans to simplify council tax rules on HMOs, potentially saving tenants around £1,000 per year.
Currently some councils treat each room in an HMO as a separate property for tax banding purposes, meaning each tenant has to pay the full rate of council tax. When HMOs have been rebanded, this has sometimes left tenants on the hook for large back-dated tax bills.
But following on from a consultation by the Department of Levelling Up, Housing and Communities, the government plans to create new regulations defining HMOs as single properties for tax purposes. The law is set to come into force by the end of the year – although as the Renters (Reform) Bill and the government’s leasehold reforms plan show, housing policy proposals are often subject to change.
Will all HMOs be affected?
It is still possible that some HMOs will fall through the cracks, according to Phil Turtle, compliance director at Landlord Licensing & Defence. The government’s plan as currently set out covers most HMOs, but where some or all tenants have private facilities outside their bedsit door (for example, a private bathroom along a shared corridor), those HMOs may still be assessed on a room-by-room basis.
How will councils respond?
Simplifying HMO tax rules will save tenants and landlords money, but closing the loophole will put further pressure on council budgets. Local authority leaders warned last month that they could be bankrupted by the rising cost of emergency accommodation. Rising eviction numbers and growing rents mean that the worst affected are now spending over a quarter of their core budgets on temporary housing alone.
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